Snapshot Summary…

Global FX: The dollar extended its gains albeit slightly as sentiments stabilise and some sell-off among safe-haven currencies

Global Rates: The UST market continued to trend towards weaker levels as sentiment reverted from the risk-off

MYR Bonds: Malaysia’s government bonds posted another day of losses as global rates were seen higher

USD/MYR: Ringgit gave up further grounds as it briefly touched above the 4.50 level

Macro News

New Zealand: The unemployment rate in New Zealand picked up to 4.6% in 2Q2024, following an upwardly revised 4.4% in the previous quarter. This was the highest rate since the first quarter of 2021, slightly below the anticipated 4.7%.

China: China’s Export growth was recorded at 7.0% y/y in July 2024, a slowdown from the 8.6% increase in June. On the other hand, imports grew by 7.2% y/y, rebounding strongly from a 2.3% decline in the prior month, the most robust growth since April. This import increase was supported by government initiatives aimed at boosting domestic demand.

United Kingdom: The Halifax House Price Index in the UK rose by 2.3% y/y in July 2024. Lower mortgage rates and a rate cut by the Bank of England favour homebuyers despite affordability and housing shortages. House prices will continue a modest upward trend for the rest of the year.

Fixed Income

Global bonds: The UST market continued to trend towards weaker levels as sentiment reverted from the risk-off sentiment after last Friday’s weak jobs report. The 10Y UST was seen back hovering near the 4.00% level. The market was also affected by supply concerns as overnight saw a USD42 billion sale of 10Y Treasury notes, where the 2.32x BTC was the weakest since December 2022. The US sold USD58 billion worth of 3Y notes on Tuesday and will sell USD25 billion in 30Y bonds on Thursday.

MYR Government Bonds: Malaysia’s government bonds posted another day of losses yesterday. On top of higher global rates, the sentiment was particularly affected by Japan’s FX's official comment of no intention to hike rates during unstable market conditions. IRS levels were notably higher in the morning session. Meanwhile, the 7Y GII auction met with firm demand, with final BTC at 2.331x despite the market selling down, and traders noted a short tail of 1.5 bps.

MYR Corporate Bonds: Yesterday, we noted a weaker bias in the corporate bond market as sentiment caught up with losses seen in the government bond space. AA led flows- rated UMWH Perp, which rose 14 bps to end at 4.21%, and GG Prasarana 02/35, which fell 13 bps to 3.91%.

Forex

United States: The dollar extended its gains, albeit slightly by 0.2%, to close above the 103 level as the market continued to calm following recent volatilities. The dollar also found support following retracements among safe-haven currencies: yen (-1.6% d/d) and Swiss franc (1.2% d/d). Investors will now brace themselves for jobless claims later tonight, where the consensus is that there will be 240k initial claims.

Europe: Amidst a stronger dollar, the EUR fell 0.1% while the GBP held steady at around 1.26, and it was still near its more than one-month low. On the data front, the UK’s house price grew 0.8% m/m in July after stagnant growth in the prior month, and it was faster than market expectations of 0.3% m/m. This may have partly supported the GBP yesterday.

Asia-Pacific: The USD/JPY pair rebounded sharply to close above 146-level after two straight sessions of below 145 closing prices. The rebound can be attributed to the pare of expectations that the BoJ would raise its interest rates again in the 20th September meeting after it did so last week, following BoJ Deputy Governor Shinichi Uchida's statement that the central bank will not tighten its policy if financial markets are unstable. In contrast, the Chinese yuan weakened by 0.3% to close at 7.177, following mixed economic data and a weaker fixing rate. The PBoC set Wednesday's yuan’s fixing at 7.1386 per USD, the lowest level since November 2023. The AUD was relatively stable after a day the RBA kept its interest rate unchanged and reiterated its hawkish message.

Malaysia: The ringgit gave up further ground as it closed at 4.498 after briefly touching above the 4.50 level. As the market has stabilised, we posit that the USD/MYR may trade sideways until there are more signals of weakening US economic data.

Other Markets

Gold: Gold extended its bearish run for the fifth straight day as recent global volatilities are seen as losing steam.

Crude oil: Oil prices rebounded, with Brent gaining 2.4% and WTI rising 2.8% on the day as market players are looking for the development of geopolitical tension in the Middle East.

Source: AmInvest Research - 8 Aug 2024