Snapshot Summary…

Global FX: The dollar tumbled after the US Fed Chair Power reassure rate cut path this year

Global Rates: US Treasuries were mixed as inflation concerns dissipated on lower price readings of ISM Services PMI

MYR Bonds: The local bond market was down by another 1-3 bps yesterday, with noticeably heavier trading volume in the PDS market

USD/MYR: The ringgit weakened slightly amidst mixed regional currencies performance

Macro News

United States: The Services PMI by ISM for March showed continued expansion in the services sector for the 15th consecutive month, slightly decreasing to 51.4 from February's 52.6 (consensus 52.7). The Business Activity Index increased marginally to 57.4 per cent, while the New Orders Index expanded for the 15th month in a row, despite a decrease to 54.4 per cent. The Employment Index contracted for the third time in four months, with a reading of 48.5 per cent. The supplier Deliveries Index indicated faster deliveries, while the Prices Index decreased to 53.4 per cent. The Inventories Index contracted for the fourth consecutive month, and the Backlog of Orders Index dropped into contraction. Twelve industries reported growth, and the overall sector continues to show sustained growth, albeit slower in March. The report also highlighted ongoing improvements in logistics and the supply chain, employment challenges, and concerns about inflation despite some price stabilisation.

Euro Area: The annual consumer price inflation in the Euro Area for March 2024 decreased to 2.4%, below the expected 2.6% and reaching a four-month low. This decline in inflation has reinforced expectations for monetary policy easing by the European Central Bank (ECB), with the market anticipating four rate cuts by the end of 2024, starting in June. Core inflation, excluding food and energy items, decreased to 2.9%, a two-year low. Services experienced the highest annual inflation rate in March at 4.0%, followed by food, alcohol, and tobacco at 2.7%, non-energy industrial goods at 1.1%, and energy at -1.8%. Croatia, Austria, Estonia, and Belgium recorded the highest annual inflation rates among Euro Area members, while Lithuania, Finland, Latvia, and Italy had the lowest.

Fixed Income

Global bonds: The Bund market pared early session’s losses with the belly, and the long-end part of the curve turned to marginal gains after the Eurozone’s inflation came in lower than expected, and ECB’s Pablo Hernandez de Cos said his “central scenario” is interest rate cuts to start in June. Later, during the US session, the US Treasuries were mixed as the price component in March ISM Services PMI dropped, alleviating the inflation concerns, and following Fed Chair Powell maintained two or three rate cut trajectory for this year.

MYR Government Bonds: Overall, the local bond market was down by another 1-3 bps yesterday. The increasing fear of recent robust U.S. economic data has led market players to further unwind their long bond position. In the primary space, we will auction new issuance 7.5Y GII 10/31 this Friday at MYR4.5 billion with no private placement, while W.I. was last quoted at 3.83%.

MYR Corporate Bonds: Trading volume in the PDS market was noticeably heavier at MYR1.15 billion, with much of it concentrated on higher-rated papers GG/AAA. Among notable trades were MYR100 million on 04/37 Danainfra done at 3.98%, MYR190 million on 06/25 Danum Capital (AAA) done at 3.62% and MYR30 million on 13/32 CIMB Group done at 3.89%.

Forex

United States: The dollar index tumbled after the March ISM services index unexpectedly declined, and the ISM services price paid index fell to a four-year low. Fed Chair Powell stated it would be appropriate for the Fed to cut interest rates "at some point this year” but also said there is time to let data guide policy direction.

Europe: The weak dollar and data showing the Eurozone unemployment rate was unchanged in February at a record low aided the euro. However, the Eurozone March CPI fell to 2.4% y/y from 2.6% y/y, better than expectations of 2.5% y/y. March core CPI fell to 2.9% y/y from 3.1% y/y, which was also better than expected.

Asia-Pacific: Yesterday, USD/JPY strengthened as trading was cautious before US data releases culminating with the NFP on Friday. The cautious tone left sentiment ignoring this week's release of Japan's services PMI up further above the breakeven point in March. Elsewhere, the yuan changed little but remained near recent lows, although there was support for yesterday’s levels as news reports suggested China’s state banks remained net sellers of the dollar.

Malaysia: News reports showed that since late last month, BNM had met various stakeholders regarding taking in their feedback on macro and financial markets. For issues regarding the ringgit, BNM said the discussion touched on tools to provide support, including whether BNM will consider raising the overnight policy rate (OPR). The sessions involved ministries and agencies, the diplomatic corps, the banking and insurance industry players, economists, banking analysts and fund managers, the corporate sector, and the media, BNM said in a statement.

Other Markets

Gold: Gold price rose 0.8% to another record high of USD2,300/oz after Fed Chair Jerome Powell reiterated the rate cut path by the central bank this year.

Crude oil: Brent gained nearly USD90 per barrel while WTI rose to USD85 per barrel after OPEC+ ministers did not recommend changes to current output cuts during an online ministerial review meeting.

Source: AmInvest Research - 4 Apr 2024