Snapshot Summary…

Global FX: The dollar index consolidated recent gains, falling by 0.2%

Global Rates: US Treasuries rebounded firmer overnight, alongside with gains on Bunds and Gilts

MYR Bonds: Local government bond market was broadly supported with some buying interests on 5Y benchmark

USD/MYR: Ringgit chalked up another day of losses despite better regional currencies performance

Macro News

Australia: In Australia, its central bank left interest rates unchanged at a 12-year high and it also signalled that further monetary tightening remains a possibility. The Reserve Bank held the cash rate at 4.35% and said in a post-meeting statement that “further increase in interest rates cannot be ruled out”. At her first conference, RBA Governor Michele Bullock emphasized the board’s hawkish stance by saying inflation remained “too high.” Aside, Australia reported that its retail sales fell 2.7% m/m in December versus 0.1% expectation and prior month's 1.6%.

Europe: Adding to growth risks in the eurozone, its retail sales fell slightly more than expectations in December. The figure was a decline of 1.1% m/m against -1.0% m/m expectation and +0.3% in November. Retail sales fell 0.8% y/y for the month but meeting expectations.

Fixed Income

Global bonds: US Treasuries rebounded firmer overnight after past few days of large losses. Lack of US data releases contributed to the gains while Treasuries also gained amid more speculation of state assistance to support China’s equities market and speculation that the Bank of Japan may exit its negative rate policy as early as March. Elsewhere, gains were seen in the Bunds and Gilts markets. The European Central Bank's December Consumer Expectations survey showed that year-ahead inflation expectations slowed to 3.2% from 3.5%.

MYR Government Bonds: The local government bond market was generally supported following the broad sell-down during the previous day and we saw some buying interest in the 5Y benchmark possibly due to the roll-down effect. The 5Y MGS fell 2 bps to close at 3.53% while the 10Y MGS shed 1 bps to close at 3.81%.

MYR Corporate Bonds: The ringgit corporate bond market was mostly mixed yesterday but we noted some interest on AA papers possibly due to investors looking for yield pickup. 10/28 Eco World (AA-) fell 4 bps to 4.05% while 11/28 MMC Corp fell 15 bps to 4.11%.

Forex

United States: Dollar demand took a step back on Tuesday following a few days of NFP-prompted rally amidst lack of data release. This was also contributed by the dovish-tilted tone speeches by Fed officials. Cleveland Fed Loretta Mester (voter) said that policymakers will gain more confidence later this year to cut rates if the economy evolves as expected. In addition, Minneapolis Fed Neel Kashkari noted that a lot of progress has been made on inflation.

Europe: The EUR benefitted from a weaker dollar, gaining 0.1%. Larger decline in Eurozone’s retail sales during December 2023 (-1.1% m/m vs. consensus -1.0% m/m) limit the common currency’s gains. At the same time, the GBP saw better performance, notching up 0.5% gains by the end of the day.

Asia-Pacific: The yuan firmed slightly by 0.1% after multiple days of falling, amidst the weaker dollar and hopes of more policy support, which caused a rally in Chinese equities. The PBoC also set yuan fixing before the session at 7.1082, compared with Bloomberg median estimate of 7.2025. Meanwhile, the JPY rose 0.5% to 147.94. The average cash earnings in Japan grew by 1.0% y/y (consensus: 1.3%), an improvement from 0.2% y/y in the prior month, but still lagging against 2.3% core inflation rate. In Australia, the RBA during its policy meet-up for the first time this year, decided to maintain its interest rate at 4.35%, its 12-year high. The AUD finished the day at 0.652.

Malaysia: The ringgit depreciated 0.4% to settle near its intraday high of 4.769, despite the broad decent performance on other regional currencies. It translates into weak ringgit cross performance against those currencies.

Other Markets

Gold: Gold price rebounded, gaining 0.5% to USD2,036/oz, as the dollar and UST yields fell. Crude oil: Crude oil prices further found support after the US Energy Department said crude oil production would grow less than initial expectations. Brent rose 0.8% while WTI climbed 0.7%.

Crude oil: Crude oil prices further found support after the US Energy Department said crude oil production would grow less than initial expectations. Brent rose 0.8% while WTI climbed 0.7%.

Source: AmInvest Research - 7 Feb 2024