Snapshot Summary…

Global FX: The dollar demand was firm to start the week and closed just above the 105 level overnight

Global Rates: UST yields surge after US Manufacturing PMI data surprised to the upside

MYR Bonds: The local bond market was cautiously bullish, with interest emerging around the belly and back-end of the curve

USD/MYR: The ringgit also ended lower vis-a-vis the strong USD yesterday

Macro News

United States: In March, the Manufacturing PMI by ISM registered a growth reading of 50.3, marking an expansion in the U.S. manufacturing sector for the first time since September 2022, after 47.8 in February. The new orders index also rebounded into expansion territory at 51.4 (vs. 49.2 in the prior month), signalling an improvement in demand. Additionally, the production index significantly increased to 54.6 (vs. 48.4 in the preceding month), indicating strengthened output. On the other hand, employment continues to decline, albeit at a moderate pace, and prices have risen moderately. Overall, the U.S. manufacturing sector showed signs of positive development in March, with improved demand and output, despite ongoing employment and challenges with input costs.Japan: The Bank of Japan's quarterly Tankan survey revealed a decline in business confidence among large Japanese manufacturers in the first quarter, with expectations for further weakening in the next three months. The headline sentiment index for big manufacturers dropped to 11, slightly above the market forecast of 10, marking the first decrease in a year. The outlook for large manufacturers also dipped to 10, below the anticipated 11. In contrast, large non-manufacturers experienced increased business confidence, reaching a high not seen since 1991, though it is projected to decline in the coming quarter.

Fixed Income

Global bonds: Yields on US Treasuries surged due to signs of growth rebound observed in the Institute for Supply Management’s (ISM) manufacturing PMI index. The index turned positive for the first time in 17 months, indicating an improvement in the industrial sector. At the same time, the prices-paid component, which measures inflation, rose further, signalling persistent inflation. This week's economic data will focus on the nonfarm payrolls report for March, which is anticipated to show the creation of 200K new jobs in the U.S. economy.

MYR Government Bonds: The local bond market was cautiously bullish yesterday, with interest emerging around the belly and back-end of the curve, especially for tenure 15Y and above before the U.S. market resumed its trading session tonight from the Good Friday break last week. The market was also cautious ahead of the US PMI data released after market hours.

MYR Corporate Bonds: Flows in the PDS segment were decent at MYR621 million. Among notable trades were MYR110 million on 07/30 Malaysia Rail Link (GG) done at 3.78%, MYR40 million on 03/43 TNB Power Generation (AAA) done at 4.15%, and MYR80 million on 10/26 MRCB (AA-) done at 4.41%.

Forex

United States: The dollar soared and closed just above the 105 level overnight. The dollar's strength came alongside a surge in overnight UST yields from data releases; last Friday's data comprised a rise in US personal spending and the PCE price index. Meanwhile, Monday's data comprised the ISM manufacturing index surging to 50.3 in March against 48.3 consensus and February's 47.8.

Europe: EUR/USD and GBP/USD both fell, the former down 0.4% and the latter by 0.6%, amid the surging USD on the back of US data plus sustained reaction from Powell's remarks that seemed to be designed to counter market's expectations of a Fed rate cut by mid of the year.

Asia-Pacific: The yen slipped by 0.2% against the firm US dollar. The yen's current struggle, as it continues to hover above 151 vs the dollar since mid-March, saw a remark from FinMin Shunichi Suzuki that authorities are monitoring FX developments and could take measures against excessive yen moves. Meanwhile, the yuan fell against the market's steady dollar demand even as Bloomberg reported that China's state-owned banks continued selling dollars.

Malaysia: The ringgit also ended lower vis-a-vis the strong USD yesterday. We foresee cautious MYR movements until the US reports the March non-farm payrolls by the end of the week.

Other Markets

Gold: Gold price rose to another record high again at USD2,251/oz amid a broad optimism on global growth after China and US Manufacturing PMI showed expansion.

Crude oil: Crude oil prices were mixed as Brent was down 0.1% to USD87 per barrel while WTI was up 0.6% to USD84 per barrel on the back of economic growth in the U.S. and China will support demand, while supplies continue to be tight on OPEC+ output cuts and attacks on Russian refineries.

Source: AmInvest Research - 2 Apr 2024