Snapshot Summary…

Global FX: Dollar edged lower amidst lack of US data releases

Global Rates: Both the US and UK bond markets were closed on Monday due to Memorial Day and Spring Bank holidays

MYR Bonds: The local govvies market was little changed, but flow in the PDS space was healthy

USD/MYR: The ringgit was supported and remained below the 4.700 level

Macro News

China: China's industrial profits increased by 4.3% y/y in the first four months of 2024. This reflects ongoing government efforts to sustain economic recovery amid challenges such as weak domestic demand and a property market downturn. Profits in the private sector accelerated, while those in state-owned firms declined further. Industrial profits rebounded 4.0% in April from a 3.5% decline in March.

Fixed Income

Global bonds: Both the US and UK bond markets were closed on Monday due to Memorial Day and the Spring Bank holidays. The key 10Y Bund yield eased slightly in Europe amidst a muted trading day. This week's spotlight for the eurozone will be on May consumer prices on Friday, while individual inflation readings from Germany, Spain and France will also be released before that. News flow showed that the market is already betting 90% probability for the ECB to start easing interest rates during next week's meeting.

MYR Government Bonds: The local bond market was little changed due to holidays in some key global markets. We reckoned that local players continued to remain light on duration risk ahead of several key US economic releases this week. The reopening auction of MGS 04/31 later this Wednesday would help to further gauge the overall trading sentiment in the local market.

MYR Corporate Bonds: The PDS market started the week on a firm footing, with a decent overall flow of MYR534 million. Among notable trades were MYR30 million on 07/25 PR1MA Corporation, which was done at 3.550%, MYR20 million on 07/29 Pengurusan Air Selangor (AAA), which was done at 3.869%, and MYR10 million on 03/26 Cellco Capital (AA), which was done at 4.416%.

Forex

United States: The dollar traded lower and closed at 104.60 amidst a lack of data but was poised for its first monthly decline of the year. Recent forex trading has primarily revolved around the reduction in expectations of the US interest rate cut outlook and ‘carry’ trades — seeking high-yield currencies and, thus, supporting the dollar.

Europe: The euro was steady overnight as markets were mainly in guarded mode before more data releases this week, and the US market closed for a public holiday on Monday. The euro was boosted after ECB Chief Economist Philip Lane said the central bank may be careful to lower rates after an expected June cut in view of high inflation risks and whether the Fed will be on schedule to cut rates as well.

Asia-Pacific: The yuan remained weak but found support below the 7.245 level amid gains in China’s stock market, with data showing profits at Chinese industrial companies moving back into positive territory in April. Prior to Monday's market opening, the PBoC set the midpoint USD/CNY rate at 7.1091, or firmer than the previous fix of 7.1102. In Japan, BoJ Governor Kazuo Ueda said the central bank will continue with inflation targeting but after so long under the negative rates regime, finding a neutral interest rate level now will prove difficult, and that the BoJ will be cautious in policy alterations to lift inflation. The yen closed firm on Monday, with USD/JPY down 0.1%.

Malaysia: The ringgit was supported and was seen yesterday below the 4.700 level. This was amid cautious dollar trading ahead of pertinent data that will be released later this week while the US market was closed on Monday. Firm yuan on Monday also aided the ringgit alongside the release of firm China industrial profits numbers yesterday.

Other Markets

Gold: The price of gold took advantage of the lower dollar on Monday, rising for the first time in five sessions. It gained 0.7% to USD2,351/oz.

Crude oil: The price of oil rose, with Brent gaining 1.2% ahead of Saturday's OPEC+ meeting. The meeting is expected to extend 2.2 million barrels per day of voluntary supply cuts into the third quarter.

Source: AmInvest Research - 28 May 2024