Snapshot Summary…

Global FX: Dollar fell after US economic data showed soft patches

Global Rates: UST gains with yields dropping to a three-week low

MYR Bonds: Government bonds were steady, reacting from the within expectations PCE data from Thursday

USD/MYR: Ringgit weakened slightly amidst the cautious global market sentiment

Macro News

China: The official National Bureau of Statistics of China (NBS) Manufacturing PMI in China edged lower to 49.1 in February 2024 (consensus: 49.1), down from 49.2 in the prior month amidst slump in the sector It added that with the week-long Lunar New year break, most factories closed or slowed down their operations. At the same time, the Non-Manufacturing PMI improved to 51.4 (consensus: 50.8) from 50.7, marking 14th straight months of growth.Eurozone: The region’s headline inflation rate for February 2024 eased further to 2.6% y/y from 2.8% y/y but remained above market forecast of 2.5% y/y. Its core inflation rate, excluding volatile and energy prices, also grew slower at 3.1% y/y, down from 3.3% y/y in January but above market forecast of 2.9% y/y. Despite the further easing of inflation, the figure remained above ECB’s target of 2.0%.

United States: The Institute for Supply Management (ISM) Manufacturing PMI in the US showed sharper deceleration in growth as the index fell to 47.8 in February 2024 from 491 in the previous month, setting 16th straight month of decline in the manufacturing sector.

Fixed Income

Global bonds: US Treasuries rallied on Friday, translating to much lower yield curve with the 2Y yield falling 9 bps while the 10Y yield declining 7 bps. This was prompted by safe-haven demand by investors after US economic data already signalling soft patches. The US construction spending declined 0.2% m/m in January 2024, after 1.1% growth in the December 2023, and falling short of the market consensus of 0.2% m/m growth.

MYR Government Bonds: Local bond performance was steady following US PCE data did not print any upside surprises on Thursday. We suspect support was provided by demand on the belly and the back end of the curve due to attractive yield levels

MYR Corporate Bonds: Flows in the PDS market were heavy with MYR931 million volume traded. We noticed gainers outpacing losers with interests seen on higher grade papers (GG, AAA). Among notable trades were MYR130 million on 08/26 Cagamas done at 3.71%, MYR15 million on 09/29 Bank Pembangunan Malaysia done at 3.74%, and MYR10 million on Putrajaya Bina done at 3.63%.

Forex

United States: The dollar index fell 0.3% to close Friday at 103.86, erasing some gains from prior days after data showed weaknesses in the US economy. Among the disappointing data were the ISM Manufacturing PMI, Michigan Consumer Sentiment, and construction spending.

Europe: The euro was supported amid the weaker dollar, but sentiment was cautious ahead of the ECB meeting scheduled for 7th March. There was support on Friday upon release of the February flash CPI at +0.6% m/m (last -0.4%), and + 2.6% y/y (last 2.8%) and the February flash Core CPI was +0.7% m/m (last -0.9%), and up 3.1% y/y (last 3.3%).

Asia-Pacific: CNY fell last Friday upon mixed PMI numbers for China. China's February Manufacturing PMI fell to 49.1, within expectations, from 49.2 in January. However, the Caixin Manufacturing PMI rose a tad to 50.9 from 50.8 previously. Markets now look forward to the National People's Congress in the coming week, where policymakers will lay out economic targets and policy for the year. JPY fell on dovish remarks by BOJ governor Kazuo Ueda who sees little change to inflation levels.

Malaysia: The ringgit fell amid the cautious global market sentiment ahead of the global PMI data releases last Friday. USD/MYR moved higher to settle the day at 4.746.

Other Markets

Gold: Gold price rose to record high as it was propped up by lower dollar amid the release of not so impressive global economic data, as well as declining bond yields. Gold rose 1.9% last Friday to close at 2,083 per oz.

Crude oil: WTI price remained supported by worries over supply, on the back of OPEC+ anticipated to announce output cuts into 2Q2024.

Source: AmInvest Research - 4 Mar 2024