Macro News

Eurozone : Eurozone's January ZEW Economic Sentiment index fell to a reading of 22.7 from 23.0 (against expectation of 21.9). Meanwhile, Germany's January ZEW Economic Sentiment index rose to 15.2 from 12.8 in the previous month (expected 12.0) and ZEW Current Conditions index ticked down to -77.3 from -77.1 (expected - 77.0). Aside, CPI in December was up to 0.1% m/m from -0.4% prior month, and meeting expectations by rising 3.7% y/y, as expected (last 3.2%).

China : Chinese Premier Li Qiang delivered an address at the World Economic Forum in Davos and made an early disclosure that China’s growth last year is expected to be about 5.2%. China is set to release the official GDP performance for 2023 on Wednesday. The 5.2% GDP growth estimate would likely come in just above the government’s target of around 5%, set at the beginning of last year, and will be a rebound from 3% growth in 2022.

Australia: Australian consumer sentiment took a turn for the worse in January amid cost of living pressures and higher mortgage rates. The Westpac-Melbourne Institute index of consumer sentiment fell 1.3% in January, versus from December’s +2.7%.

Fixed Income

Global bonds: US Treasuries reopened on Tuesday after the prior day holiday with underperformance. Sentiment was cautious especially after China's central bank held its 1Y medium-term lending facility rate steady at 2.5% and as ECB officials tried to temper market expectations for earlier-than-expected interest rate cuts. The UST market was also cautious upon investors reading a WSJ article suggesting the Fed will start a discussion about slowing the pace of its quantitative tightening.

MYR Government Bonds: Overall, we saw weakness in the ringgit government bond space yesterday, mainly driven by players scaling back aggressive rate cut expectations at the Fed after most recent release of more robust economic data, which overshadowed by geopolitical tensions between US and the UK against Yemen. The 10Y MGS was dealt 1 bp higher to close at 3.81%.

MYR Corporate Bonds: Ringgit corporate bonds were still supported yesterday despite a weaker performance in the govvies market. The gainers yesterday, in terms of volume traded, were led by some AA rated papers, such as 03/33 YTL Power (AA1) at 4,10% (-2 bps) and 04/27 Golden Asset (AA2) at 4.14% (-1 bps).

Forex

United States: The Dollar was largely supported as the DXY index climbed by 0.9% to 103.96 overnight. USD strengthened as UST yields also rose as markets had recently scaled back some expectation of an early Fed rate cut. The WIRP function on Bloomberg states probability of a rate cut at the March FOMC had come down to 62% this week versus 78% expectations last week.

Europe: The pound and euro both fell amid the resurgent the US dollar. EUR was additionally pressured after recent ECB officials’ comments tempered expectations of earlier-than-expected interest rate cuts. The GBP was also under some pressure amid cautious sentiment before release of latest UK CPI data this week.

Asia-Pacific: In China, the yuan continued to slide, amid firm US dollar and continued worries over China’s growth ahead of GDP release this week. CNY continued to decline as well after the PBoC had surprised the market by keeping its 1Y mediumterm lending facility unchanged at 2.50%. Meanwhile, JPY also fell amid the dollar strength, and as sentiment was also cautious before Japan’s CPI data release this week.

Malaysia: The ringgit extended its decline versus the US dollar yesterday as markets continued to reassess US Fed interest rate cut timing and quantum. USD/MYR was up 0.5% to close yesterday at 4.695.

Other Markets

Gold : Gold prices fell yesterday on hints of profit taking after prior days’ gains, but sentiment was also guarded for gold amid a rise in USD and bond yields.

Crude oil : Mixed performance in oil markets overnight. Worries over supply amid Middle East geopolitical risks were mixed with cautious demand outlook.

FBM KLCI: The FBM KLCI fell yesterday to follow the regional performance.

Source: AmInvest Research - 17 Jan 2024