Snapshot Summary…

Global FX: The DXY weakened slightly but remained firm near 104.5 on Friday

Global Rates: US markets were closed for a holiday, while German Bunds posted modest gains

MYR Bonds: The local bond market was little changed as most regional markets were closed for Good Friday

USD/MYR: The ringgit rose to go along with other currencies in the region

Macro News

United States: The Bureau of Economic Analysis (BEA) reported that the Federal Reserve's preferred inflation gauge, the core personal consumption expenditures (PCE) price index, increased by 0.3% m/m in February, aligning with economists' predictions and a slight deceleration from January's 0.4% m/m growth. On a year-over- year basis, the core index, which omits food and energy costs, climbed 2.8% y/y. This data suggests a robust economy, particularly in the labour market, despite persistent inflationary pressures slightly above the Federal Reserve's 2% target. The latest figures underscore a cautious stance by the Federal Reserve towards reducing interest rates in 2024 amidst signs of economic resilience and sustained consumer spending, which rose by 0.8% m/m, outpacing a 0.3% increase in personal incomes.Japan: Japan’s industrial output fell by 0.1% m/m in February 2024, marking the second consecutive month of decline, following a significant 6.7% contraction in the prior month, the largest since May 2020. On an annual basis, industrial output contracted by 3.4% y/y, extending the downward trend to four consecutive months. In contrast, retail sales in Japan showed a robust increase of 4.6% y/y, surpassing market expectations of 3.0% growth and accelerating from 2.1% in January. However, the unemployment rate increased to 2.6% in February, higher than both market forecasts and the January figure of 2.4%, marking the highest since September.

Fixed Income

Global bonds: US markets were closed for a holiday on Friday. Meanwhile, German Bunds posted modest gains in Europe as sentiment was aided by expectations of ECB rate cuts by the middle of the year.

MYR Government Bonds: The local bond market changed slightly as most regional markets closed on Good Friday. Meanwhile, the MYR5.0 billion reopening of the 5Y MGS 08/29 (no PP) was relatively weak at 1.80x bid cover and a tail of about 2 bps. The average yield was 3.681%, but it was traded lower to 3.665% post-auction on the suspected covering of short positions.

MYR Corporate Bonds: On Friday, trading was lacklustre in the ringgit corporate bond space whilst yields moved mixed. Notable action includes those on 03/29 Gamuda (AA3) at 2.85% (unchanged) and 03/31 Gamuda at 4.05% (+1bp), while 12/28 AEON (AA3) was dealt last at 3.97% (-1bp).

Forex

United States: The DXY weakened slightly but remained firm near 104.5 on Friday. The focus of FX markets on Friday was mainly on Fed Powell’s remarks and Fed- preferred PCE inflation data. Amongst other points, Powell said the Fed is in no rush to cut rates until it is confident that inflation is sustainably heading towards 2%. He said labour market weakness could trigger a Fed reaction but that the Fed is not expecting weakness in the labour market. Powell's remarks came after print of the PCE price index rising a moderate 0.3% in February, though up by a higher 2.5% y/y. Core PCE rose 0.3% following an upward revised 0.5% in January gain but a lower 2.8% y/y.

Europe: The euro was subdued but remained steady at nearly 1.079. EUR/USD was in range ahead of US PCE inflation data. Euro was also pressured by the release of weak German retail sales data and remarks from Fed Governor Waller that policymakers would not rush to cut interest rates in the US.

Asia-Pacific: The yuan remained pressured despite gaining 0.1% to 7.222 last Friday alongside gains in the Chinese stock markets, amid sustained expectations that the PBoC will ease monetary policy further to aid economic growth. The yen was supported on Friday despite a steady US dollar, as data showed Tokyo core inflation slowed modestly in March.

Malaysia: The ringgit rose, alongside other currencies in the region, on the back of better risk appetite, even as the dollar was steady ahead of the US PCE prices data release on Friday. USD/MYR fell 0.2% to close at 4.725.

Other Markets

Gold: Gold price was held near a record high at USD2,230/oz, fuelled by bets on US Fed rate cut expectations and the ongoing geopolitical tension.

Crude oil: Crude oil price was stable, as Brent was at USD87 per barrel while WTI was at USD83 per barrel on the back of a tight supply outlook due to the OPEC+ remaining committed to cutting production and the ongoing attacks on Russia’s energy infrastructure.

Source: AmInvest Research - 1 Apr 2024