Snapshot Summary…

Global FX: Dollar fell against other G10 currencies to follow the drop in UST yields

Global Rates: Weaker-than-expected US PMI data pushed for safe-haven bid on growth concerns

MYR Bonds: Onshore government bonds moved sideways and in line with regional markets

USD/MYR: Ringgit snapped its fourth straight day of bullish trend

Macro News

United States: The US S&P Global Composite PMI headline reading dropped to 50.9 in April 2024 from 52.1 in the prior month, marking the lowest reading in 2024. Both manufacturing and services sectors posted lower PMI readings as new orders declined for the first time in six months, while employment dropped for the first time since 2020. In addition, backlogs of work fell for the third consecutive month while business sentiment hit a month low.Eurozone: In contrast with that of the United States, the Composite PMI for the Euro Area improved to 51.4, the highest since May 2022, up from 50.3, supported mainly by the services sector as output rose for the second straight month while the manufacturing sector remained in contraction zone but at the slowest rate in 11 months. Employment levels have increased the most since last June, but inflows of new orders stay under pressure.

Fixed Income

Global bonds: US Treasuries posted gains due to a decline in the S&P Global US Manufacturing and Services PMI data. The US Manufacturing PMI fell into contraction territory (below the 50 mark). Though the Services PMI rose, the Eurozone April flash Manufacturing PMI also fell. Nevertheless, the primary segment was weaker with the issuance of USD69 billion in the 2Y papers where BTC was 2.66x versus 2.70x average at 12 previous auctions of the same tenor.

MYR Government Bonds: Onshore government bonds moved sideways and aligned with regional markets as the UST was traded in a narrow range between 4.600% - 4.640% ahead of the S&P Global US Manufacturing and Services PMI release overnight. Meanwhile, we have a re-opening of the 3Y GlI (GII 09/26) on Thursday, and we suspect there has been some offloading of this stock ahead of the auction amid a bearish backdrop in the overall bond space. On the flip side, we heard there were bidding interests for short-term papers at tenors below one year as USD/MYR was hovering below the resistance level of 4.800.

MYR Corporate Bonds: The ringgit PDS market saw decent volume with notable trades seen on MYR160 million on Danainfra 10/36 done at 4.062%, MYR80 million on Lebuhraya Duke Fasa 3 08/39 (AA-) done at 5.215%, and MYR50 million on UEM Sunrise 09/26 (AA-) done at 4.023%.

Forex

United States: Underwhelming flash S&P Global PMI, which showed the slowest growth this year, sent the dollar lower, prompting the market to rethink the US Fed interest rate outlook. The boosted equity market also drained liquidity, pushing the dollar lower. The DXY index fell 0.4% into the 105-area and lost its ground against other G10 currencies, also in tandem with the lower UST yields.

Europe: The EUR and GBP were both on the upside on Tuesday against the weaker dollar and after the Euro Area’s and UK’s Composite PMI suggested business activity is growing at the fastest pace in 2024. In addition, the upward drive for the GBP also came from hawkish comments by BoE Chief Economist Huw Pill, saying interest rate cuts are still some ways off despite the recent progress on disinflation.

Asia-Pacific: Asian currencies mostly gained their ground vs. the dollar. The JPY pared its losses after the US PMI data was released and further strengthened after news flow suggested that BoJ policymakers will focus on the weakening yen during its policy meeting this Friday. The AUD gained on the day was also due to better PMI reading. On the other hand, the CNY weakened slightly by 0.02% but remained relatively stable, supported by Chinese state banks’ providing dollar liquidity in the onshore market.

Malaysia: Ringgit snapped its fourth straight day of a bullish trend after trading between 4.773 and 4.782 to follow the bearish sentiment on the CNY despite the lower USD. We may see the USD/MYR pair trend lower today due to a weaker dollar overnight.

Other Markets

Gold: Gold prices pared some of its losses after US economic data showed weaker- than-expected business activity growth and may support the case for Fed cuts this year.

Crude oil: Oil prices closed in green after the weakening economic data was interpreted as bullish by markets as traders searched for clues for the Fed’s next move. Brent jumped 1.6%, while WTI surged 2.2%.

Source: AmInvest Research - 24 Apr 2024