Snapshot Summary…

Global FX: Euro and dollar were little changed but the GBP fell as traders looked at the latest UK jobs numbers

Global Rates: Treasuries fell after Fed chair Powell said restrictive monetary policy still needs to be in place

MYR Bonds: We noted auction of 15Y MGS was well-received as we think players were taking the opportunity to load up on longer tenor bonds

USD/MYR: The ringgit continued to weaken versus the dollar post-release of firm US retail sales data and concerns over the Middle East tensions

Macro News

China: China reported faster-than-expected economic growth in 1Q2024. Gross domestic product rose 5.3% in the period, slightly faster from the previous quarter of 5.2% and beating estimates of 4.8%. The target for full-year GDP growth is 5% which means we think the 1Q number is on track. However, we also see risks as the upbeat 1Q data was mainly aided by public investment levels.

China: Despite the print of upbeat GDP for 1Q, we noted also that industrial production in China was lower than expectations; the March 2024 industrial production growth was 4.5% against the 6.0% Bloomberg consensus expectation. Meanwhile, retail sales for March showed a 3.1% growth while Bloomberg consensus expectation was higher at 4.8%.UK: Britain’s unemployment rate unexpectedly rose to the highest in six months. According to the Office for National Statistics, the jobless rate rose to 4.2% in the three months through February from 4% in the period through January. The rate is the highest since the summer of 2023. Average weekly earnings for the period reviewed was 5.6% y/y versus a similar 5.6% in the prior three-month period.

Fixed Income

Global bonds: Treasuries fell further yesterday. The day started with weak sentiment after the print of upbeat China GDP numbers and later sustained weakness despite below-consensus US Housing Starts data and in-line Industrial Production numbers. Treasuries also weakened after Fed chair Powell commented that restrictive monetary policy needs to still be in place as inflation has not shown adequate progress downward.

MYR Government Bonds: MGS weakened yesterday, pressured by overnight UST losses due to stronger US retail sales data. Aside, in the primary space, the auction of 15Y MGS was well-received with the final BTC standing at 2.159x while we think some players were taking the opportunity to load up on longer tenor bonds.

MYR Corporate Bonds: The ringgit corporate bonds segment maintained downbeat trading activity as well though flows were more active as traders started to return fromtheir Eid break. Losses included 01/30 Guan Chong IMTN (AA-) at 4.48% and 12/24 MACB (AAA) at 3.70%.

Forex

United States: The dollar sustained strength though little changed still hovering above the 106 level on the DXY. Bearish signals from the equities markets after their recent rally meant some lack of dollar demand, but there remains apprehension on the Middle East geopolitical risks while the latest comments from Fed chief Powell on slow development on the inflation front kept up dollar strength.

Europe: The Euro was little changed at the close alongside the dollar being in range. On the other hand, the GBP fell and was seen hitting a five-month low as traders looked at the latest UK jobs numbers. There was an unexpected rise in UK unemployment to 4.2% versus the expectation of 4.0%.

Asia-Pacific: The yuan lost some ground against the strong dollar. The release of strong 1Q2024 China GDP did not aid sentiment for the yuan. As it were, though the GDP growth was firm, China also reported industrial production and retail sales growing less than anticipated. Meanwhile, the yen also continued to weaken vis-a-vis the dollar. Comments from Japanese Finance Minister Shunichi Suzuki that he was watching currency moves and would take a "thorough response as needed" did not appear to support the yen.

Malaysia: The ringgit continued to weaken versus the dollar post-release of firm US retail sales data and amid concerns over the Middle East tensions.

Other Markets

Gold: Gold maintained strength, seen above USD2,380 overnight. Gold was held back as Powell warned that restrictive policy needs more time to take hold though safe haven demand was intact amid geopolitical risks.

Crude oil: Oil fell with Brent down 0.1% on some ease in geopolitical risks compared with a couple of days ago. Print of firm China GDP was mainly shrugged aside especially as Brent was already above the USD90 per barrel level, in our opinion.

Source: AmInvest Research - 17 Apr 2024