Snapshot Summary…

Global FX: USD index fell with notable gains for the JPY on speculation of BoJ policy exit

Global Rates: Sentiment was cautious before today’s non-farm payrolls data release.

MYR Bonds: Yields moved sideways but there was a bias in concentration in GII trading yesterday

USD/MYR: The MYR was pressured by cautious trading before the NFP release

Macro News

Euro Area : The Euro Area economy contracted by 0.1% in the 3Q2023, marking the first decline since 4Q2022. The negative GDP growth was primarily attributed to a 0.3 ppts contribution from changes in inventory. Fixed investment remained unchanged, and net external demand made a neutral contribution as a decline in exports was offset by a drop in imports. Household consumption and public spending both rose by 0.3%. Among major economies, Germany, France, and the Netherlands experienced contractions, while Spain and Italy saw expansions.

United Kingdom : The Halifax House Price Index recorded a 1.0% y/y decline in November 2024, following a revised 3.1% drop in October. Ongoing economic uncertainty, the broader cost of living, employment rates, and affordability issues are expected to continue impacting demand, leading to further price declines in the coming months.

China : China's exports unexpectedly grew by 0.5% y/y to USD 291.93 billion in November 2023 rebounding from the previous month's 6.4% decline and surpassing market expectations of a 1.1% drop. This positive development, the first increase since April, is attributed to manufacturers cutting prices to attract buyers. Notable increases were observed in sales of unwrought aluminium & products (7.5%), steel products (43.3%), and rare earths (42.6%), while refined products (-17.3%) and grains (-20%) experienced declines.

Fixed Income

Global bonds: It was a mixed finish in a narrow range for UST trading overnight. Declines of 1-4 bps were seen on shorter dated papers while longer dated 10Y rose a small 1 bp and the long bond 30Y edged up 2 bps. Sentiment was cautious before today’s non-farm payrolls data release. Meanwhile, there was some support for UST due to safe haven demand on the back of volatility in the JPY and BoJ Governor Ueda who told the Japan parliament that the central bank has options on how to exit the negative interest rate policy. JGBs underwent a sharp selldown yesterday. Elsewhere, there was support for Bunds. ECB member Villeroy de Galhau warned against fasterthan-expected disinflation which will prompt ECB rate cuts.

MYR Government Bonds: There was mixed trading in the sovereign space yesterday. Yields moved sideways but there was a bias in concentration in GII trading yesterday. There continued to be pickup in bonds (continuation of recent rallies) but some caution ahead of NFP today played against sentiment as well, especially as the day before saw a more cautious trading in the UST market.

MYR Corporate Bonds: Relatively strong performance was seen in the credit space yesterday despite the mixed MGS and GII trading. Though volume remained heavy, in a sign of caution compared with the day before, traded volume in corporate bonds was lower at MYR515 million. Notable flows include those on AA1 08/31 Maybank at 4.11% and quasi name 07/41 Malaysia Rail Link done at 4.27% which shed 3 bps.

Forex

United States: The USD index fell with notable gains for the JPY overnight on speculation of BoJ policy exit. There was also a cautious sentiment for the greenback as we face NFP release tonight.

Europe: GBP was pressured amid the market volatility due to the JPY rally, but late support brought the currency back above 1.255. There was support for the EUR. Eurozone's 3Q2023 GDP contracted 0.1% q/q, which was as expected (previous: 0.1%) and was unchanged y/y (expected 0.1%; last 0.6%).

Asia-Pacific: The yuan was firm as China released its latest trade data. Exports increased by 5% in November, but imports fell by 0.6% and missed expectations of a 3.3% increase. Traders were in a cautious mood in yuan trading as they await China’s inflation data due for release on the weekend. Aside, the yen shot up which was brought on by Governor Ueda’s comments that the BoJ has options on how to exit the negative interest rate policy.

Malaysia: MYR closed weaker versus the USD for a third consecutive trading day. Sentiment for the MYR was cautious ahead of NFP release today, even though the USD was also pressured in the run up to the data release.

Other Markets

Gold : Gold price was moderately stronger on Thursday, coinciding with the weaker US dollar. Gold remains aided by global market’s caution before the NFP release.

Crude oil: Crude prices remained pressured, especially on the demand side including China demand risks, as well as risks on the supply side after OPEC+ announced supply cuts last week.

FBM KLCI: Malaysia's index closed weaker and moving in line with regional bourses. The FBM KLCI fell 0.2% but lagging the decline in China, Hong Kong, and Singapore markets.

US Equities: Major US indices all rebounded after the previous day’s profit taking pressures. Supporting US stocks overnight were technology stocks as the tech-heavy Nasdaq rallied 1.4%.

Source: AmInvest Research - 8 Dec 2023