Macro News

United States : The producer price index (PPI) contracted 0.1% m/m during December 2023, after a 0.1% contraction in the prior month, compared to +0.1% market expectations. Costs for goods dropped 0.4% m/m while services price was unchanged. Excluding food and energy, core PPI was flat, the same as previous month’s reading.

United Kingdom : In November 2023, the UK economy posted a modest rebound in economic activity, growing 0.3% m/m after a drop of 0.3% in the prior month, and beating market forecast of only 0.2% growth. It was the fastest growth in five months, led by the growth in services activity, namely information and communication, wholesale and retail trade, and professional, scientific and technical activities. Industrial output also expanded, led by manufacturing sector.

Fixed Income

Global bonds: The UST market closed the week on front footing after producer inflation data suggest that disinflation is making progress in the US. The yield curve steepened with 2Y down 10 bps to 4.14% while the 10Y yield dropped 3 bps to 3.94%. According to the CME FedWatch tool, market players have already pricing in 74.5% probability for 25 bps rate cut during March meeting compared to around 64% earlier last week. In the meantime, Bund yield curve steepened as well with 10Y Bund yield shed 5 bps to 2.18%.

MYR Government Bonds: The local bond market was relatively flat on Friday despite US core CPI in the prior day showed that the inflation remained sticky with the data exceeded consensus forecast (3.9% vs 3.8%). The overall market sentiment was mixed as the headlines centred around the outbreak of geopolitical tension between US and UK against Yemen leading the market to overshadow the still sticky inflation from the US. Meanwhile, we saw that the 30Y MGS moved the most as it was well received from the auction tender Friday with the BTC of 2.99x.

MYR Corporate Bonds: In the corporate space, most papers rallied with only one paper made its debut (05/25 Sabah Credit Corp). Among notable trades were MYR40 million on 11/36 Danainfra Nasional done at 3.99%, MYR10 million on 08/24 HLFG (AA1) done at 3.63%, and MYR30 million on 09/30 Press Metal Aluminium (AA2) done at 4.12%.

Forex

United States: The dollar initially was down following tepid reading on PPI data but managed to recover its losses after Reuters reported escalations on geopolitical conflicts in the Middle East especially in the Red Sea. The DXY index rose 0.1% to end the day at 102.40.

Europe: Across the Atlantic, the EUR fell 0.2% and gave up early gains as the dollar outperformed. The early support came from unexpectedly healthy reading on consumer consumption in France. In the meantime, the GBP fell as well but the quantum was rather muted as UK’s November GDP grew faster than expected, providing some tractions for the currency against higher USD.

Asia-Pacific: The yen firmed 0.3% to 144.88 despite stronger dollar as the expectations for an imminent Fed rate cut is in contrast with BoJ’s plan of reversing its negative interest rate policy. In China, the yuan was relatively steady and close Friday at 7.168. This is after data showed China’s economy remained deflationary with consumer and producer inflation shedding 0.3% y/y and 2.7% y/y, respectively. However, faster exports growth data (2.3% y/y vs. 1.7% y/y expected) kept China’s recovery hope in tact.

Malaysia: Amidst safe haven bids, the MYR weakened 0.1% to 4.648. It was traded within the range of 4.641 and 4.649 during Friday.

Other Markets

Gold : Precious metal gold rallied 1.0% to USD2,049/oz on the day as investors focused on Middle East tensions and Fed rate cut expectations.

Crude oil: Oil prices jumped with Brent rising 1.1% and WTI gaining 0.9% after the escalation of Middle East geopolitical conflict, raised the prospect for shortfall in oil supplies.

FBM KLCI: The FBM KLCI rose 0.3% to 1,487. Foreign investors sold a net MYR1.4 million worth of Malaysian shares on Friday.

US Equities: US equities were mixed as Dow Jones fell 0.3% to 37,593, S&P500 rose 0.1% to 4,784, while Nasdaq was steady at 14,973.

Source: AmInvest Research - 15 Jan 2024