Snapshot Summary…

Global FX: The USD fell versus EUR, which in turn was aided by hawkish ECB comments

Global Rates: Treasuries fell amid the better-than-expected US PPI release MYR Bonds and

USD/MYR: Ringgit government bonds recorded net selling activity post-release of weaker-than-expected 4Q,2023 GDP

Macro News

United States: Producer inflation in the US increased 0.3% m/m in January 2024, the fastest growth since August 2023, a sign of resurfacing inflation pressure. The Producer Price Index (PPI) final demand, fewer foods and energy (core PPI), rose 0.5% m/m (consensus 0.1%) following a 0.1% decline in December. On a y/y basis, PPI rose 0.9% versus 0.9% in December, and core PPI rose 2.0% versus 1.7% in December.

Malaysia: Amid slower global trade and private consumption, Malaysia reported its gross domestic product (GDP) growth for the fourth quarter of 2023 at 3.0% or lower than the 3.4% advance estimate released last month and with the 3.3% expansion in the preceding quarter. The slower-than-expected growth had weighed on the full year’s GDP figure, coming in at +3.7% in 2023 compared with +8.7% in 2022. Singapore: Singapore has budgeted a surplus of SGD0.8 billion for 2024 or 0.1% of the GDP. According to Deputy Prime Minister and Finance Minister Lawrence Wong, the 2024 budget target is a balanced fiscal position. This budget is the first instalment of the Forward Singapore (Forward SG) programme. A key feature of Forward SG is major investments to help mid-career workers upgrade their skills and support those laid off.

UK: UK retail sales rose by a stronger-than-expected 3.4% in January (December: - 3.3%). A Reuters poll had forecast that sales volumes would increase by 1.5%. The latest increase was the biggest since April 2021, the Office for National Statistics said.

Fixed Income

Global bonds: US Treasuries ended Friday on a weaker note and completed their weekly losses. Following the negative sentiment on bonds from the better-than- expected US CPI data earlier in the week, the UST market reacted negatively to the also better-than-expected US PPI release on Friday. The PPI impact on bonds overshadowed the weaker-than-expected US housing starts (actual 1.33 million versus consensus 1.47 million).

MYR Government Bonds: Ringgit government bonds recorded net selling activity post-release of weaker-than-expected 4Q,2023 GDP. However, the market also saw support after players reacted to the firm UST movement the night before the disappointing US retail sales numbers were released. In the end, the market was in range ahead of the US PPI release and more Fed-speak to come.

MYR Corporate Bonds: Generally mixed close for the corporate bond market last Friday. Investors mostly picked up infra-related papers and found value in select tranches. Notable trades include 01/27 Sarawak Energy (AAA) at 3.67%, 23/30 Jimah East (AA-) at 4.43%, and 08/38 YTL Power (AA-) at 4.10%.

Forex

United States: USD fell slightly against a steady EUR. There was early support for the USD upon releasing firmer-than-expected US PPI data and the Fed officials’ speech. These include Richmond-Fed's Barkin (FOMC voter), who said the past week's strong inflation data was why the Fed would wait for more data before cutting rates. Meanwhile, Atlanta Fed's Bostic (also an FOMC voter) said there is no urgency to cut amid a strong labour market. Bostic added that it will take time before inflation stabilises towards the 2% target.

Europe: The EUR was supported by hawkish ECB comments, which also lifted Bund- yields to a 2.5-month high. ECB Executive Board Member Schnabel said monetary policy should remain restrictive and that the ECB should be cautious seeing the recent- long period of high inflation. On the other hand, the GBP was flat on Friday, aided by stronger-than-expected UK retail sales data release for Friday,

Asia-Pacific: The JPY lost out versus the USD-seeing-the-firm US PPI number. There was little to support the JPY as BoJ Governor Ueda said that policy would likely remain accommodative even if the central bank could end the current hostile interest rate policy later. Aside from the JPY as a safe haven, it also fell after a rally in the Nikkei.

Malaysia: Ringgit government bonds recorded net selling activity post-release of weaker-than-expected 4Q,2023 GDP, which included strong performance in regional stock markets while aided by firm global crude oil prices.

Other Markets

Gold: Gold prices gained 0.5% to above USD2,014/oz amidst weaker dollar demand.

Crude oil: Crude oil prices gained as investors’ concerns about the ongoing geopolitical tension in the Middle East outweigh the International Energy Agency forecast of slower oil demand in 2024. Brent rose 0.7%, while WTI climbed 1.5%.

Source: AmInvest Research - 19 Feb 2024