Snapshot Summary…

Global FX: The dollar remained weak post-FOMC as it moved 0.4% lower to close the day at 105.3

Global Rates: The US bond market continued to strengthen and erased early losses on the heels of mixed macroeconomic data releases

MYR Bonds: The Malaysian government bond market posted modest gains following the prior day’s UST strength

USD/MYR: The MYR strengthened yesterday alongside other regional currencies against the weaker USD

Macro News

Eurozone: The S&P Global final Eurozone manufacturing Purchasing Managers' Index (PMI) fell to 45.7 in April from 46.1 in March, standing below the 50-mark for the 22nd month. However, the actual reading was just ahead of the 45.6 estimates. The data suggests that the manufacturing activity in Europe remained in a downturn in April amid weak demand even as factories reduced prices. Manufacturers were also reported to continue to reduce their workforce in April. Germany's final April Manufacturing PMI rose to 42.5 (consensus 42.2) from 41.9 the month before.

United States: Factory orders in the US rose 1.6% m/m in March (consensus +1.6%) after increasing a revised 1.2% in February (from 1.4% prior estimate). Excluding transportation, factory orders increased 0.5 (+1.1% in February). Shipments of manufactured goods rose 0.3% after increasing 1.4% in February. Data suggest a pickup in new orders in March for durable and non-durable goods.

Fixed Income

Global bonds: The US bond market continued to strengthen after this week's FOMC meeting. The improved sentiment for bonds erased early losses on the heels of an unchanged weekly jobless claims report (208k in the week ended 27 April), a smaller than expected increase in 1Q2024 non-farm productivity at +0.3%. (consensus 0.8%) and a bigger than expected increase in unit labour costs at 4.7% (consensus 2.5%). Markets now await the April non-farm payrolls, where the consensus expectation is for a smaller rise of 240K against 303K in March.

MYR Government Bonds: The Malaysian government bond market posted modest gains following the prior day’s UST strength post-FOMC meeting. Nevertheless, we anticipate a cautious market today ahead of the April non-farm payrolls data release. At the close, we note that the 3Y MGS is down 2 bps, closing at 3.60%, and the 10Y MGS was down 2 bps, closing at 3.96%. On the other hand, IRS rates were mainly unchanged on most tenors.

MYR Corporate Bonds: Corporate bonds were dealt sideways, lagging behind the MGS strength post-FOMC. We expect better pickup today to follow the MGS strength yesterday, but we think some caution amongst traders ahead of the US jobs datashould limit overall gains. Yesterday’s losses include those on 11/28 Inti (AAA), which rose 8 bps to close at 4.32%, and 01/28 TNB Western (AAA), which edged 1 bps higher to close at 4.25%. Along the GG segment, 05/30 Jambatan Kedua rose 2 bps to close at 3.96%, though on light trading.

Forex

United States: The dollar remained weak as it moved 0.4% lower to close the day at 105.3. Downward shift in the USD continued for a second day after the FOMC meeting. The dollar trading mainly ignored fresh data prints, including unchanged weekly jobless claims. Also, US factory orders increased 1.6% m/m in March (consensus 1.6%) after an upward revised 1.2% (from 1.4% in February). Factory orders, ex transportation, increased by 0.5% in March after a 1.1% increase in February.

Europe: Despite the mixed PMI prints, the EUR posted against a USD decline. These include Eurozone's final April Manufacturing PMI at 45.7 (consensus 45.6; March 46.1) and Germany's final April Manufacturing PMI at 42.5 (consensus 42.2; March 41.9). EUR traders did not react strongly to comments by ECB policymaker Pablo Hernandez de Cos, who said inflation is falling and should increase to 2% by the middle of next year.

Asia-Pacific: The JPY strengthened on Thursday, aided by the USD index coming down to below the 106 level post this week’s FOMC meeting, as well as better sentiment for the JPY on suspected BoJ intervention to buy up the currency the day prior on Wednesday as reported by Reuters. The news agency reported that Japan's vice finance minister for international affairs, Masato Kanda, declined to comment on whether authorities had intervened in the market. The USD/JPY fell by 0.6% yesterday, closing at 153.64.

Malaysia: The MYR strengthened alongside other regional currencies against the weaker USD yesterday. USD/MYR fell a firm 0.4% to settle at 4.755. Along the crosses, the MYR was firmer versus the HKD and GBP but fell against a resurgent JPY and the SGD and IDR, reflecting mixed FX markets yesterday as we headed towards today’s US jobs data release.

Other Markets

Gold: Gold partly reversed its prior day’s gain, falling 0.7% to close at USD2,304 per oz. The day before, gold rallied by 1.5% as markets assessed the latest comments from Fed chairman Jerome Powell.

Crude oil: Oil prices were mixed yesterday. The lack of apparent improvements in the Middle East crisis supported the Brent crude price. However, WTI remained pressured after the EIA reported that US oil inventories rose by 7.3 million barrels last week earlier this week versus Reuters consensus estimate of a 1.1 million barrel decline.

Source: AmInvest Research - 3 May 2024