Snapshot Summary…

Global FX: Dollar fell amidst a lack of data-driven flow

Global Rates: The US Treasuries posted gains on longer-end tenors led by gains in Bunds

MYR Bonds: The local bond market recovered slightly despite U.S. PCE remained sticky

USD/MYR: The Ringgit started the week on firmer footing, opening Monday at 4.769, the strongest level since mid-April

Macro News

Euro Area: The economic confidence index dropped to 95.6 in April from 96.2 in the previous month, and lower than expected 96.9. The economic sentiment index deteriorated notably in industry, and services, retail trade and construction experienced moderate falls. Only consumer confidence improved from March. The consumer sentiment indicator was unchanged at -14.7 from the flash estimate and improved from -14.9 in March.

Germany: German inflation climbed slightly in April by 0.5% m/m, faster than March’s 0.4% m/m but lower than the market consensus of 0.6% m/m. This translates into annual growth of 2.2% y/y (consensus: 2.3% y/y). Core inflation, which excludes volatile food and energy prices, eased to 3.0% in April from 3.3% in March. The statistics office said that energy costs were 1.2% y/y lower despite the discontinuation of a brake on prices in January, the introduction of a higher carbon price, and the end of a temporary VAT reduction from 19% to 7% for gas and district heating. Energy prices fell 2.7% y/y in March.

Fixed Income

Global bonds: The US Treasuries ended higher with gains seen larger on the tail part of the curve and were led by gains seen in Bunds after German inflation numbers came in below to align with market expectations, solidifying the case for June’s rate cut. However, gains were pared after the Treasury Department estimated higher borrowing during the current quarter (new USD243 billion vs. prior estimate of USD202 billion). The borrowing needed for 3Q2024 is estimated to be USD847 billion.

MYR Government Bonds: The local bond market recovered slightly despite the sticky U.S. PCE. Nonetheless, we think the market players will remain cautious about the near-term outlook for the local bond space. Possible one-off withdrawal from EPF account 3 coupled with US to keep rates higher for longer may keep a lid on any swift recovery from the recent sell-off.

MYR Corporate Bonds: The PDS market continues to trade primarily in weaker territory. Among notable trades were MYR240 million on 10/35 Danainfra, done at 4.055%; MYR40 million on AEON Credit, done at 4.097%; and MYR20 million on UEMS IMTN, done at 4.129%.

Forex

United States: The Dixie fell to follow the drop in UST yields amidst a lack of data- driven flow on Monday. Dollar sell-off was also seen against other major currencies despite the recent US inflation report showing stubborn price pressure.

Europe: The EUR gained 0.3% the day after the hawkish tone of ECB Vice President Luis de Guindos, who said the ECB faces “significant” dangers in achieving its inflation goal, especially coming from the Middle East tension. The hawkish speech came amidst data released reporting that Germany’s headline inflation grew slower than what the market expected.

Asia-Pacific: Following the sudden weakness of JPY last Friday when it closed the day at above 158-level, the currency shot up sharply to end Monday at 156.35 after reaching as strong as 154.54 level per dollar on suspected intervention by authorities. In China, the yuan took advantage and rose the most in months against the retreat in the dollar. Today will be the final trading day for the onshore China market this week as the country is expected to go on the Labour Day holiday and reopen on Monday, 6th May 2024. The Aussie dollar marked the sixth straight day of climb after a recent uptick in Australia’s inflation data.

Malaysia: The Ringgit started the week on firmer footing, opening Monday at 4.769, the strongest level since mid-April, and finished at 4.768. This is in contrast with the surge in dollar last Friday as the large gains in JPY partly improved sentiment in the market thus, benefitting the ringgit.

Other Markets

Gold: Gold prices fluctuated and finished at USD2,336/oz, slightly lower than the previous session’s close as market players were waiting for key US jobs data and a Fed policy meeting.

Crude oil: Oil prices closed in the red, with Brent falling 1.2% while WTI dropped 1.5% as global markets digested the progress made on ceasefire talks between Israel and Hamas.

Source: AmInvest Research - 30 Apr 2024