Snapshot Summary…

Global FX: Dollar edged lower, completing the fourth straight day of lower trend

Global Rates: US Treasuries rallied further with the 10Y UST closing below 4.35%

MYR Bonds: The bond market strengthened slightly post-release of weak US ISM manufacturing data

USD/MYR: The ringgit was supported as it opened at 4.682

Macro News

Malaysia: Malaysia’s S&P Global Manufacturing PMI recorded the first improvement since August 2022, increasing to 50.2 from 49.0. This signals a shift from the previous period of subdued conditions and suggests an acceleration in GDP growth heading into the second quarter. Such a favourable data is driven by strong export demand from other countries and a strengthened employment growth rate.

United States: The number of job openings in the US shrank for the second month amid further signals of cooling in the labour market. It declined to 8.059 million, lower than the market consensus of 8.34 million in April 2024. The number of jobs quits increased to 3.5 million in April 2024 from a revised 3.4 million.

Fixed Income

Global bonds: US Treasuries rallied further on Tuesday with the 10Y UST closing below 4.35% or down 6bps. Continued decline in crude oil prices aided bonds as well as release of economic data. US factory orders rose 0.7% m/m in April (consensus 0.6%) and where the March number was revised downward to a 0.7% increase from 1.6% previous estimate. Aside, Bunds gained on the heels of the UST rally and before the ECB policy meeting on Thursday.

MYR Government Bonds: The bond market strengthened slightly as it opened this week to follow the UST gains the day before, post release of weak US ISM manufacturing index. Players also reacted to last week’s release of the US Core PCE index which was below estimates. The market focus now shifts to the US NFP and unemployment data releases this week.

MYR Corporate Bonds: There was a continued mixed performance in the corporate bond market. Modest gains in the MGS segment did not spur more interest in the PDS market. Instead, we noted AAA PLUS traded sideways on suspected yield realignment. In the AA segment, we especially noted that bank papers traded mixed. As for the PLUS papers, notable trades include 10Y 01/34 PLUS dealt at 3.94% (-8 bps) and slightly shorter maturity 01/33 PLUS dealt at 4.00% (-2 bps).

Forex

United States: The dollar index trimmed its earlier losses but still closed Tuesday lower at 104.11 following the JOLTs report showing the number of jobs opening coming in lower than market expectations, indicating further softening in the US labour market. Lower dollar was also in tandem with the decline in UST yields. Global volatilities also rose after some economies had elections (India, Mexico). However, the market remained cautious as US factory orders excluding the volatile transportation component, rose 0.7% m/m, much more than consensus of 0.4% m/m.

Europe: Despite the lower dollar, the EUR fell as market players were cautious ahead of the upcoming ECB meeting. GBP also slipped the day after retail sales in the UK fell short of market expectations.

Asia-Pacific: Most Asia-Pacific currencies posted gains against the weaker dollar, including the JPY and CNY. The Japanese yen rose 0.8% but stayed below the 155 level to close at 154.88, supported partly by the BoJ official Ryozo Himino's statement that a weak yen can affect imports, among others. Market players took it as a sign of discomfort among authorities against the yen’s bearish run. Meanwhile, after softer US job openings data, the yuan's extended gains continue to fuel the US Fed rate cut hopes. The PBoC sets daily yuan fixing at 7.1083 vs. the prior day's 7.1086.

Malaysia: The ringgit was supported to start the shortened working week and opened at 4.682 before it retraced some gains to close at 4.702 per dollar. We may see the ringgit to trade firmer today following last night’s US lower job data.

Other Markets

Gold: Gold price fell 1.0% to USD2,327/oz as market players took profit despite most recent data showing mixed development in the US economy.

Crude oil: Oil prices remained on bearish trend as Brent fell 1.1% to USD78 per barrel while WTI shed 1.3% to USD73 per barrel, taking cue from API reporting US inventories climbed 4.1 million barrels last week, a sign of healthy oil supply.

Source: AmInvest Research - 5 Jun 2024