Macro News

United States : The Fed held its benchmark Fed Funds Rate (FFR) at 5.25%- 5.5%. Policymakers signalled they were thinking about when to lower interest rates but need to wait for more convincing evidence of continued downturn in inflation. “It’s a highly consequential decision to start the process” of lowering interest rates “and we want to get that right,” said Fed Chair Jerome Powell. “We’ve made a lot of progress on inflation. We just want to make sure that we do get the job done in a sustainable way.”

Eurozone: Yesterday saw the Caixin/S&P Global manufacturing PMI at 50.8 in January, unchanged from December and beating forecasts of 50.6. However, a day previously the official PMI rose to 49.2 in January from 49.0 in December, but still below the 50-mark. It was in line with Reuters median forecast of 49.2.

Malaysia : The seasonally adjusted S&P Global Malaysia Manufacturing PMI rose to 49.0 in January from 47.9 in December, the highest since September 2022. The reading suggests that the year’s worst is over and sets the manufacturing sector on course for a gradual recovery.

Fixed Income

Global Rates: Treasuries gained, and yields ended the day at their lowest level in the past five weeks after traders weighed risks on the US economy, despite the hawkish tone communicated by the US Fed during policy decision day recently. The initial jobless claims rose to 224K last week, higher than the prior week’s level of 215K and beating market expectations of 212K. Also, traders were concerned about US regional banks after the New York Community Bancorp posted a surprise loss and disclosed it is having difficulties in commercial real estate. But the gains were pared after healthy improvement on January’s Manufacturing PMI. By the end of the day, 10Y UST fell 3 bps to close at 3.88%.

MYR Government Bonds: On Wednesday, before the FOMC meeting, local govvies remained supported with mixed movements on the belly part of the curve. The weaker sentiment can be attributed to some profit-taking throughout the day due to the uncertainty of whether 10Y UST can remain supported at the current level.

MYR Corporate Bonds: The trading volume in the PDS space was heavy at MYR726 million. Among notable trades were MYR55 million on 01/30 Pengurusan Air SPV (AAA) done at 3.95%, and MYR20 million on 03/28 MMC Corp (AA-) done at 4.17%.

Forex

United States: The dollar initially rose on a boost from Fed Chair Powel signalling against a Fed cut in March. However, the dollar turned lower after a drop in bond yields and was weighed down by economic data. Weekly initial jobless claims unexpectedly rose 9k to a month high of 224k, versus expectations of a decline to 212k. 4Q2024 nonfarm productivity was +3.2%, versus expectations of +2.5%. On the other hand, the January ISM manufacturing index unexpectedly rose 2.0 to a 15-month high of 49.1, stronger than expectations.

Europe: The euro rose as the dollar fell overnight. Meanwhile, the pound rose 0.4% after the Bank of England voted to leave rates unchanged at Thursday's meeting, as expected. There was mixed inflation data for Germany. Flash January CPI rose 0.2% m/m, as expected (December: 0.1%), and up 2.9% y/y (consensus: 3.0%; December: 3.7%). Eurozone's January Manufacturing PMI rose to 46.6 from 44.4, as expected.

Asia-Pacific: CNY fell due to a firmer USD post-FOMC meeting. USD/CNY rose 0.2% to close yesterday at 7.181. The Caixin Manufacturing PMI beat expectations, but markets remained wary of China’s growth risk, which did not help interest in CNY. JPY firmed up 0.3%. Japan's January Manufacturing PMI remained at 48.0, as expected. Japan’s December retail sales rose 2.1% y/y (consensus: 4.7%; last: 5.4%).

Malaysia: The ringgit reversed its early gains on Wednesday to end lower against the US dollar as the US dollar had inched higher ahead of the Fed interest rate decision.

Other Markets

Gold : Gold closed with gains on Thursday as the dollar turned lower.

Crude oil : Brent crude fell by more than 3% to below USD79 per barrel on Thursday, reversing earlier gains, amid ceasefire talks in the Israel-Hamas conflict. Earlier, Brent was trading above $81 per barrel on supply constraints as OPEC affirmed this quarter’s production cuts of 2.2 million barrels per day.

Source: AmInvest Research - 2 Feb 2024