Macro News

United Kingdom: The S&P Global/CIPS UK Services PMI rose to 53.4 in December 2023, marking the second consecutive expansion in the British services sector. The growth was the fastest since June, driven by an upturn in new orders and signs of a consumer demand revival, especially in financial services and technology sectors. Despite cost-of-living pressures and a tight budget, wage pressures contributed to the highest input cost inflation since August.

Euro Zone: The HCOB Eurozone Services PMI was revised upward to 48.8 in December 2023, indicating the fifth consecutive contraction in services output across the bloc. Demand for eurozone services declined at the year's end, and employment growth slowed, while backlogs of work continued to decrease. Input cost inflation decreased to a five-month low, while output charges increased at a quicker pace. Despite improved business confidence, growth expectations remained weak in historical terms.

China: The Caixin China General Service PMI rose to 52.9 in December 2023, marking the 12th consecutive month of growth in services activity and the fastest expansion since July. The increase was driven by a solid rise in new business, with new orders growing the most in seven months. Employment increased for the first time in three months, and export orders reached the highest levels since June. Input price inflation hit its highest since July, driven by higher raw material prices and labor costs. However, output cost inflation eased to a four-month low. Sentiment strengthened to a threemonth high amid hopes of stronger economic conditions and increased customer spending.

Fixed Income

Global bonds: UST curve was bear-steepening as market players pared the rate cut expectation following stronger labour market data. According to the CME FedWatch tool, the probability for a 25 bps rate cut by the US Fed has been trimmed to 62.7% as of writing compared to 72.8% last week. Bund curve also tumbled with yield on 10Y climbed 10 bps.

MYR Government Bonds: Local bond market continued to lose ground yesterday, inline with regional bonds performance as the market continued to re-assess their expectation of the scale of rate cuts by the Fed. Meanwhile, the sell-off seen in MGS market today could be back by the higher trend of 10Y U.S. Treasury yield (+5 bps) following the FOMC minutes released in the prior day.

MYR Corporate Bonds: In the PDS space, trading volume was lower at MYR461 million with two Ranhill Solar Ventures tranches made their debut on MYR30 million volume. Other notable trades include MYR20 million on 10/25 Amanat Lebuhraya Rakyat (AAA) done at 3.78%, and MYR20 million on 08/25 Press Metal Aluminium (AA2) done at 3.88%.

Forex

United States: The dollar rose earlier during the session but then took a step back after four consecutive days of rally, falling 0.1% to close at 102.42 last night. Despite the stronger labour market data (lower initial jobless claims and higher job addition by private businesses), investors consolidated last few days gains. Investors now wait for non-farm payroll data which will be released later tonight.

Europe: The EUR climbed 0.2% to 1.095 against the lower USD. France and Germany saw higher inflation for December due to elevated energy prices. Both are generally in line with market forecast. In the meantime, the GBP also went up by 0.1% to settle at 1.268. UK’s services sector was more resilient than initially thought as the services PMI improved to 53.4 in December from 50.9 in the prior month.

Asia-Pacific: Asian currencies again were mostly on the downside as investors remained cautious ahead of key US labour market data tonight. The JPY weakened again by 0.9% to 144.63 as the expectations for the BoJ to keep accommodative policy in place rises after the recent natural disaster hit Japan. In China, the yuan fell 0.2% to 7.161 with 10Y China government bond yield dropped to 2.54%, the lowest since 2020. The widening yield gap with UST 10Y (4.00%) puts further pressure on the currency.

Malaysia: The USD/MYR pair traded higher for the third consecutive days taking cue from the lower dollar during previous session and ahead of key NFP data tonight. It to closed the day at 4.635. The intraday high was at 4.646 and low was at 4.633.

Other Markets

Gold: Gold prices took a breath of relief after three straight days of falling, approaching USD2,030/oz level.

Crude oil: Crude oil prices fell slightly with Brent dipped 0.8% while WTI shed 0.7% as data showed large inventory increases and low fuel demand in the US weighed on prices.

FBM KLCI: The FBM KLCI climbed 1.0% to 1,477 amidst mixed performances in regional bourses. Foreign investors bought Malaysian shares of a net MYR61.7 million.

US Equities: US equities were mixed as the Dow Jones was relatively steady at 14,510, while S&P500 and Nasdaq fell 0.3% and 0.6%, respectively.

Source: AmInvest Research - 5 Jan 2024