Snapshot Summary…

Global FX: Dixie rose 0.2% to close at 104.16 and erasing early losses after key January’s PCE data was released

Global Rates: US Treasuries posted small gains driven by the January Core PCE Price index falling to +2.8% in January

MYR Bonds: Ringgit government bonds was muted following mixed data from the US the night before

USD/MYR: Risk-taking mode boosted the ringgit

Macro News

Germany: German inflation rate fell for a second month in February, at a slightly lower than expected rate of 2.5% y/y versus 2.9% y/y in the month before. Consensus expectation was 2.6% y/y. Inflation rose 0.4% month-on-month, also marginally below expectations of 0.5%.

Australia: The headline seasonally adjusted Judo Bank Australia manufacturing purchasing managers (PMI) index fell to 47.8 in February from 50.1 in January. This extended the period of weakness seen since late last year. Warren Hogan, chief economic advisor at Judo Bank, said the decline in February suggests that the strength seen in January was one-off increase in activity.

United States: According to the US Bureau of Economic Analysis, US personal Consumption Expenditures (PCE) Price Index fell to +2.4% y/y in January. This followed the +2.6% pace recorded in December though mainly in line with the market expectation. On a monthly basis, the PCE Price Index rose 0.3% m/m, as expected. The Core PCE Price Index, which excludes food and energy prices, rose 2.8% y/y, matching analysts' estimates but lower versus 2.9% the month before.

Fixed Income

Global bonds: US Treasuries posted small gains last night, driven by data releases - the biggest one being the January Core PCE Price index falling to +2.8% in January. Meantime, there was also the weaker than expected Chicago PMI for February at 44.0 versus consensus 47.6, and a disappointing Pending Home Sales report at -4.9% for Jan.

MYR Government Bonds: The ringgit government bond market remained muted following mixed data from the US the night before and players then waited for the US core PCE inflation data. Meanwhile, 15Y GIl auction was well received with BTC close to 3x and we think players were still hunting for yield on long dated bonds.

MYR Corporate Bonds: Flows were relatively heavy in the ringgit corporate bonds market but yields were mixed yesterday. Notable trades include 10/38 SMJ (AAA) which rose 2 bps to 4.13% on MYR80 million volume, as well as 03/26 Pac Lease (AA flat) which closed unchanged at 3.99% on MYR50 million volume.

Forex

United States: Dixie (DXY index) rose 0.2% to close the session at 104.16, erasing early losses after key January’s PCE data was released, which was broadly in line with market expectations. The dollar demand was driven upward by the higher personal income growth at 1.0% m/m, faster than prior month’s 0.3% m/m and market forecast of 0.4% m/m.

Europe: Firmer dollar sent the EUR lower by 0.3% to 1.081. The common currency was also pressured by slightly slower growth in Germany’s inflation, a surprise uptick in unemployment rate and still subdued retail trade. Aside, the ECB Governing Council Fabio Panetta said the CPI growth is falling faster than expected, nudging more bets for ECB rate cuts this year amidst slump in growth. In the UK, the British pound also fell 0.3%.

Asia-Pacific: The Japanese yen firmed 0.5% to settle at below 150-level after market players were given signals related to the end of negative interest rate policy. BoJ member Hajime Takata said the central bank’s price target is finally coming into sight, building up the bets on the central bank to exit ultra-accommodative policy further. Meanwhile, in China, the yuan rose 0.1% to 7.189 after multiple days testing 7.190 level amidst yuan’s slide due to domestic economic worries. The PBoC set the daily yuan fixing at 7.1036, stronger than previous fix of 7.1075.

Malaysia: Ringgit gained ground by rising 0.6% to finish Thursday at 4.743, the strongest level since early February. The gains in ringgit can be attributed by the risk taking mode in the global markets as the regional stock bourses were mostly on the upside.

Other Markets

Gold: Gold price rose, up by 0.5% to USD2,044/oz, aided by key US core inflation data showing a smaller rise in January than in the month before.

Crude oil: Amid the drop in the US PCE reading, oil prices fell. Brent price fell to at USD93.62 per barrel while WTI fell to USD78.26. Supply expectations was in the balance, this week oil traders heard of rising US crude inventories against expectations that OPEC+ will extend supply cuts.

Source: AmInvest Research - 1 Mar 2024