Macro News

United States: The US ISM Services index rose to 53.4 in January from 50.5 in December and consensus of 52.0. The acceleration in January was via pickup in new orders, employment, and prices. However, the S&P Global US Services PMI fell to 52.5 in the final reading for January from 52.9 preliminary reading and the final for December of 51.4.

China: China's January Caixin Services PMI fell to 52.7 from 52.9 in December but lower than expectation of 53.0. According to the WSJ, a senior economist at Caixin Insight Group said improved market conditions boosted growth in business output and sales, though coming at a slower pace than in the month before. Caixin also said companies added staff in response to the growth in total new orders.

Europe: The Eurozone's Services PMI for Eurozone's January fell to 48.4 from 48.8 but meeting expectations. Meanwhile, the February Sentix Investor Confidence index improved to -12.9 from -15.8 (expected -15.0). Spain and Italy, at readings of 51.5 and 50.7, respectively, outperformed Germany (47.0) and France (44.6).

Fixed Income

Global Bonds: US Treasuries continued to show extensive weakness as sentiment remained pressured after the release of the strong jobs numbers last week. As for Monday’s trading, sentiment was additionally pressured by the release of strong PMI readings in Asia, as well as the US ISM Services index increasing to 53.4 in January (consensus 52.0) from 50.5 in December.

MYR Government Bonds: The ringgit government bond market followed the regional trend on net selling activity yesterday following the 10Y UST rebounding to near 4.10% post NFP release. Nonetheless, the auction for the 7Y MGS (MGS 04/31) yesterday pointed to sustained support in the bond market. Final BTC stood at 2.155x while weighted average yield was 3.780%. The 10Y MGS ended 4 bps higher to close at 3.81%.

MYR Corporate Bonds: Corporate bonds weakened yesterday alongside the net selling activity in the govvies market. Amongst others, we saw losses on higher grade papers, including 12/25 BPMB (AAA) at 3.75%. However, there remained interest on some GG papers including long dated 11/49 Danainfra at 4.24% as it fell 10 bps yesterday.

Forex

United States: The DXY index staged another day of broad rally, gaining 0.5% to finish Monday at 104.45, in tandem with the surge on UST yields as investors further pared their expectations of aggressive rate cuts by the US Fed. It was attributed by the strong Services PMI data alongside with the surge in prices in the same survey. Added further, US Fed Chair Jerome Powell over the weekend remarked that policymakers will likely wait beyond March to cut interest rate due to strong data.

Europe: Against the USD rally, both the EUR and GBP fell 0.4% and 0.8%, respectively. The HCOB Composite PMI final number for Eurozone came in line with market forecast at 47.9 while S&P Global Composite PMI for the UK improved to 52.9 compared with 52.5 expected figure. On the side, the BoE’s Chief Economist Huw Pill said interest rates could drop this year as a “reward” to the economy in bringing inflation down.

Asia-Pacific: The JPY depreciated 0.2% to 148.68 after traded within the range of 148.27 and 148.89. Japan’s private firms’ activities expanded further in January 2024 as the Composite PMI headline reading went up to 51.5 (December 2023: 50.0), driven by the expansion in the services sector. In China, the USD/CNY traded slightly higher by 0.1%, nearing its YTD high. Bloomberg suggested that dollar-buying demand continued to weigh on onshore yuan but persistent dollar-selling by state-owned banks acted as a support for yuan. Meanwhile, domestic sentiment was mixed after China tightened trading restrictions on domestic institutional investors and some offshore units to prevent further stock rout.

Malaysia: The ringgit reacted negatively to the robust non-farm payroll data last week as it opened the session at 4.739 (vs. Friday close 4.717) and finished Monday at 4.749. Its intraday high was 4.765, the highest since last October.

Other Markets

Gold: Gold price posted another day of losses, shedding 0.7% to USD2,025/oz, as the dollar and key yields surged.

Crude oil: Crude oil prices found support as Brent rose 0.9% while WTI climbed 0.7% on concerns that Middle-East and Ukraine-Russia geopolitical tensions may worsen and curb global supplies.

Source: AmInvest Research - 6 Feb 2024