Snapshot Summary…

Global FX: The pound and euro appreciated against the dollar during the US holiday

Global Rates: UK yields are up from weekly lows in light of the UK election

MYR Bonds: Poor US data supported gains in domestic government bonds

USD/MYR: Ringgit strengthened ahead of US Non-Farm payroll data

Macro News

Australia: Australia's trade surplus on goods decreased to AUD5.77 billion in May 2024, falling short of the market's forecast of AUD6.68 billion. This was attributed to slower growth in exports by 2.8% m/m, with metal ores and minerals playing a significant role in the boost. Notably, exports to China, Australia's largest trading partner, surged by 15.8%, marking a significant recovery from the 6.3% decline seen in April.

United Kingdom: The S&P Global UK Construction PMI declined to 52.2 in June 2024 from 54.7 in the previous month. Sluggish increase in new orders is attributed to election uncertainty amid accelerating job creation.

Germany: According to the Federal German statistics office, Destatis, factory orders fell for a fifth consecutive month in May, down 1.6% m/m, which is a larger decline than the revised 0.6% fall in April. Domestic orders rose slightly by 0.5%, but there was a 2.8% fall in foreign demand, with orders from non-Eurozone countries falling by 4.6% while orders from the Euro area fell by just 0.1%.

Fixed Income

Global bonds: The 4 July US holiday meant there were less drivers for the global bond markets on Thursday. As for Europe, the UK election dominated the headlines. We found UK yields up from weekly lows, anticipating public spending and lower taxes going forward. As for Bunds, yields were higher as the ECB meeting minutes show that policymakers had concerns that inflation could remain elevated.

MYR Government Bonds: The onshore government bond space extended its gains by another 1-3 bps, aided by prior day strengthening in the UST market on the back of weak US data including the disappointing ISM services index. Meanwhile, players have been seen bullish in the local bond space since last month due to the hunt for yield pick-up.

MYR Corporate Bonds: Ringgit corporate bond market recorded modest gains on Thursday. The market was supported by demand for AAA rated PLUS tranches as well as selected AA and A rated bank papers. There were heavy flows on PLUS maturing 2031 at 3.94%-3.95%. There was also steady flow on MBSB Bank 12/31 (A3) at 4.17% (-19 bps).

Forex

United States: During the US holiday, both the pound and euro strengthened against the dollar following a 0.3% decline to 105.13 in the greenback due to disappointing US economic data the day before. This movement coincided with the start of voting in Britain and the approaching French election.

Europe: The common currency euro was up for sixth straight days, notching up 0.2% against the drop in USD. The currency was slightly supported as well by wary tone from ECB Governing Council Member Mario Centeno saying policy decisions should be “gradual” to prevent the central bank to lose its credibility. Nonetheless, we think market players could turn cautious against EUR today ahead of French’s second round of election. In the UK, the GBP rose by a slight 0.1% as market participants wait for final general elections result with exit polls suggesting the Labour party is projected to win, which will overthrow the Conservatives who have been in power for 14 years.

Asia-Pacific: Most of the currencies in the region took advantage against the lower USD as the US market went into the 4 July holiday. The CNY firmed and was moving away from its lowest level since November reached recently. The PBoC set the yuan fixing midpoint at 7.1305 vs. prior day 7.1312. In Japan, the JPY took a breather from the ongoing bearish trend as it strengthened 0.3% to 161.28 on Thursday.

Malaysia: Ringgit also firmed on the day, strengthening 0.2% to finish at 4.709 amidst wider trading range of 4.708 – 4.720. This is in tandem with the gains in the MSCI EM Currency index of 0.3% and amidst improvement in global market risk appetite. However, tonight's US Non-Farm payroll data will be on investors' radar.

Other Markets

Gold: The bullion price was held steady at around USD2,357/oz as it found support amidst the ongoing uncertainties in the global political stage with major countries like France and the UK are having their respective elections, coupled with the expectations for sooner US rate cuts.

Crude oil: Oil prices were relatively unchanged as well amidst data showing drop in US crude stockpiles suggesting improving demand and worries relating to Hurricane Beryl risks.

Source: AmInvest Research - 5 Jul 2024