Macro News

United Kingdom : Bank of England Governor Andrew Bailey expressed hope for the continued decline in the cost of mortgages during a Treasury Committee hearing. He acknowledged the significant shift in market interest rates in recent months and emphasized that the reduction in mortgage costs is a positive development that he hopes will persist. Bailey refrained from commenting on the outlook for monetary policy.

Australia : The CPI for November 2023 increased by 4.3% y/y, showing a moderation from October's 4.9%. This marks the second consecutive month of a slowdown in annual inflation. The deceleration was attributed to a decrease in food prices (4.6% vs 5.3% in October), transport (3.6% vs 5.9%), health (5.2% vs 6.3%), and recreation and culture (1.2% vs 2.7%). Prices fell for furnishings, household equipment & services (- 0.3% vs 0.4%) and clothing and footwear (-0.9% vs -1.5%). However, housing prices accelerated (6.6% vs 6.1%), driven by higher costs of rent, new dwelling purchases by owner-occupiers, and electricity.

Malaysia: Malaysia's unemployment rate dropped to 3.3% in November 2023. The number of unemployed individuals decreased by 5.3% year-on-year to 569.2 thousand, while employment increased by 2.0% to a record high of 16.43 million. Additionally, the labour force participation rate rose to 70.1% in November, compared to 69.8% in the same month a year earlier. In October, the unemployment rate stood at 3.4%.

Fixed Income

Global bonds: Major global bonds posted somewhat mixed movements with UST yield curve steepened while Bund’s flattened as investors prepared for the US inflation data later tonight. Positioning by market players shifted closely to Neutral recently after the eked rally during the few weeks towards the end of the year 2023, according to the Bloomberg news flow. The UST 2Y yield fell 1 bps while 10Y yield climbed 1 bps. In Europe, hawkish sentiment by ECB official Isabel Schnabel saying that it is too early to discuss rate cuts despite the signs of further softening in the economy, had prompted the markets to pare their ECB rate cut bets, and in tandem, pressuring the Bund market. The 10Y Bund yield shifted higher by 2 bps to 2.21%.

MYR Government Bonds: Local bond market had its third day buying spree with MGS/GII rallied across all over the tenor, in-line with regional bond performance. The strong positive momentum can be due to the market is expecting the upcoming U.S. CPI data to trend lower and the current yield remained relatively attractive.

MYR Corporate Bonds:In the PDS space, among notable trades were MYR100 million on 03/24 PTPTN (GG) done at 3.31%, MYR175 million on 07/30 Sarawak Energy (AAA) done at 3.95%, and MYR40 million on 08/28 Eco World Capital (AA-) done at 4.18%.

Forex

United States:The DXY index fell 0.2% to settle Wednesday at 102.36 as investors took to the side-line ahead of key inflation data later tonight.Europe:The EUR was on front footing against the lower USD, gaining 0.4% to 1.097, benefitting from the hawkish sentiment tone provided by ECB official Isabel Schnabel. The GBP also rose against the dollar by 0.3% to finish at 1.274, following BoE Governor Andrew Bailey cautious note saying investors optimism is one of the biggest risks to financial stability this year.

Asia-Pacific:The JPY remained on bearish trend for the second day, losing 0.9% to 145.76, its weakest level since mid-December 2023. Yen’s driver was the softer cash earnings growth data at 0.2% y/y during November 2023, the smallest growth since December 2021, after a 1.5% y/y gain in the previous month. This could delay BoJ’s plan in rolling back its negative interest rate plan as the data is going against the BoJ’s criteria of sustainable wage growth. In China, yuan weakened 0.1% to 7.173 as the bias on the currency remain tilted towards the downside. The PBoC set the mid-point yuan fixing at 7.1055, much firmer than Bloomberg’s survey of 7.1625. In Australia, the lower USD aided the AUD, posting 0.2% d/d higher to settle at 0.670. The lower-thanexpected Australia’s monthly CPI indicator may put less pressure on the RBA to remain hawkish for a longer time.

Malaysia:The ringgit firmed slightly by 0.01% after the USD/MYR pair reached intraday high of 4.658. On the data front, Malaysia’s unemployment rate fell to 3.3%, returning to the pre-pandemic level, provided some support for the currency.

Other Markets

Gold: Gold fell 0.3% to USD2,024/oz as the UST yields generally went up.Crude oil:Crude oil prices closed in the red on Wednesday as data showed an unexpected build-up of crude oil in US inventory (1.34 million barrels vs. expected 0.67 million barrels drop).

FBM KLCI:The FBM KLCI fell and gave up some of the recent gains to close at 1,487 after it briefly touched 1,500 level in the prior day. Foreign investors sold MYR45.7 million worth of Malaysian shares.

US Equities:US equities closed higher as the Dow Jones rose 0.5%, S&P500 climbed 0.6%, and Nasdaq climbed 0.8%.

Source: AmInvest Research - 11 Jan 2024