Snapshot Summary…

Global FX: Dollar rose and remained above the 104 level after hawkish remarks and lower initial jobless claims

Global Rates: US Treasuries curve closed weaker overnight

MYR Bonds: The government bond market was traded mixed

USD/MYR: Ringgit could not find support despite the healthier retail sales data

Macro News

Malaysia: Malaysia’s retail sales posted a higher growth of 5.0% y/y in December 2023, up from 4.4% y/y in the prior month and further picking up steam from October 2023 low of 3.9%. In terms of volume, retail sales grew 3.6%.

China: Amidst weak consumer sentiment and a slump in the property sector, China’s consumer price index (CPI) continued its contraction trend at -0.8% y/y in January 2024, the largest decline in 14 years and worse than the market forecast of 0.5% decline. Food prices fell at a record pace of 5.9% y/y, while non-food prices dropped 0.4% y/y. Core CPI, which excludes energy and food prices, rose 0.4% y/y. On a monthly basis, the CPI rose 0.3% m/m. In addition, producer inflation fell by 2.5% y/y during the same month, suggesting deflation will persist in the upcoming months.

Fixed Income

Global bonds: The US Treasuries market closed weaker overnight. There was a lack of fresh market drivers, with a lack of fresh economic data. Still, the market was negatively affected by the release of US initial jobless claims, which fell by 9K to 218K for the week ending 3 February 2024. Meanwhile, Richmond Fed President Barkin (FOMC voter) said that the Fed does not need to rush its first rate cut in the next cycle, but UST players have mostly priced this in where a March FOMC rate cut is now out of the picture. Aside, Bunds closed weaker to follow the UST market. The European Central Bank's latest economic bulletin noted that policymakers are determined to drive inflation towards the 2.0% target in a timely manner.

MYR Government Bonds: The government bond market was traded mixed yesterday. Sentiment was affected by the weaker US Treasuries market closing the day before, and that was, in turn, due to a lack of fresh market drivers. After the previous week's rate decisions and rush of economic data, traders await to be guided by incoming Fed officials' speeches this week and the next.

MYR Corporate Bonds: The corporate bond market saw heavy flows yesterday. Interest was seen in various high-grade AAA names and various AA-rated papers. Modest gains in the govvies market this week, and we think continued interest from investors at the early part of the year, were the main drivers for the boost to the market yesterday. Amongst the activities yesterday, we noted investors picking up AAA-rated MAHB, such as 04/27 MAHB at 3.76%, which fell 5 bps, and 12/28 MAHB at 3.84 %, which fell 5 bps.

Forex

United States: Dollar demand rose slightly as the DXY index gained 0.1% to 104.14. This is after Richmond Fed President Thomas Barkin (voter) became the latest Fed official to reiterate more patience regarding rate cuts despite the “remarkable” data indicating inflation is falling. The lower initial jobless claim also supported the dollar, underpinning still robust labour in the US.

Europe: There was a rather mixed performance in the region, with GBP shedding 0.1% while the EUR rose 0.1%. According to ECB’s Chief Economist Philip Lane, the central bank needs to further guarantee that price pressure is returning to its target before policymakers can decide on trimming interest rates. In the UK, BoE official Katherine Mann said that her latest vote on a rate hike was “finely balanced”, a sign that her hawkish stance could soften in the coming month if the current trajectory remains.

Asia-Pacific: The JPY fell by 0.8% to settle the day at 149.32 following dovish-slanted remarks by the BoJ. Its Deputy Governor Shinichi Uchida said the central bank rules out raising rates rapidly when exiting the negative interest rate policy. In China, the yuan held steady and closed at 7.197 ahead of the Lunar New Year holiday, despite the stronger dollar and higher UST yields, and after China’s inflation report showed further deflation. However, the PBoC, in its quarterly monetary report, expects consumer prices to “rebound modestly” and that current monetary conditions are “reasonable”.

Malaysia: Despite the weaker dollar from the previous session and higher retail sales growth, the ringgit could not find support as it fell 0.2% to 4.773 and traded between 4.760 and 4.773.

Other Markets

Gold: Gold prices closed at USD2,035, relatively unchanged from the previous day in defiance of rising dollar and yields.

Crude oil: Crude oil prices rallied for the fourth day this week, prompted by the concerns of a broadening Middle East conflict after Israel rejected the ceasefire. Brent surged 3.1% while Brent soared 3.2%.

Source: AmInvest Research - 9 Feb 2024