Snapshot Summary…

Global FX: Dollar remained steady ahead of data catalysts

Global Rates: UST gains seen from some safe-haven demand amid rising geopolitical tensions in the Middle East

MYR Bonds: Local govvies saw light trading as last week’s volatility subsided

USD/MYR: The ringgit declined in tandem with regional Asian currencies

Macro News

Malaysia: Malaysia’s construction output recorded a significant double-digit growth of 20.2% y/y in 2Q2024, marking an acceleration from 14.2% y/y in the previous quarter. The performance is bolstered by robust growth for residential buildings (19.7% q/q vs 11.5%) and special trade activities (44.9% q/q vs 11.8%). DOSM reported 59% of construction output was mainly in Selangor, Johor, Sarawak and the Federal Territories.

United States: NY Fed’s US consumer inflation expectations index for the upcoming year remained steady at 3% in July 2024, unchanged from June. Expectations for year- ahead commodity prices saw declines for gas (down by 0.8% to 3.5%) and food (down by 0.1% to 4.7%). Median home price growth expectations held steady at 3%. On the other hand, median three-year-ahead inflation expectations saw a significant decrease of 0.6% to 2.3%, reaching a record low.

Fixed Income

Global bonds: Gilts eked out decent gains as investors brace for more UK economic data this week, starting with employment and wage growth later today. On the other hand, Bunds saw a tight trading range. In the US, the UST curve bull-flattened with gains seen on the front to the belly part of the curve, benefitting from some safe-haven demand amid rising geopolitical tensions in the Middle East as well as in Eastern Europe. The bullish movement came despite the gains in oil prices, which usually have an upward pressure on UST yields.

MYR Government Bonds: MYR bond market saw another calm day amid a lack of new catalysts and subsequently bonds recorded lighter trading. Overall volume was on the low side with most traded papers made up of maturities of up to 18 months. Players were also understandably cautious after the global bond market frenzy last week, while there was also hints of caution before key data releases this week.

MYR Corporate Bonds: Trading volume in the corporate space were lighter but remained elevated at MYR878 million with much of the buying interest concentrated on infrastructure and energy papers. But we also noticed certain banking papers made their debut; MYR15 million on CIMB Islamic 07/35 (AAA) done at 4.041%. Traders also loaded up some consumer-related papers such as 7-Eleven 06/26 and 03/27 MY E.G.

Forex

United States: The dollar index remained steady ahead of data catalysts. Traders now await key US PPI data slated to be released tonight where consensus is looking at m/m pace of 0.2% or unchanged from the previous month. Meanwhile, consensus for CPI is +0.2% m/m or above the -0.1% m/m prior month.

Europe: The EUR was supported amid the lack of USD strength and lower UST yields. Yet, EUR sentiment was guarded awaiting ZEW euro zone expectations index due Tuesday, as well as German economic sentiment and current conditions readings. As for GBP, Tuesday will see release of the latest UK unemployment data and Wednesday will have the UK CPI release.

Asia Pacific: Ahead of a batch of data releases this week, CNY weakened yesterday and seen at 7.175 level in late trading. Data on tap this week includes industrial production, retail sales, and the unemployment rate. CNY was down after already showing strength last Friday post release of higher than expected July CPI. Meanwhile, the JPY was supported despite Japan being closed for a holiday on Monday with sentiment aided by a lack of support for the USD during much of the Asian session yesterday. The AUD rallied amid the USD weakness.

Malaysia: The ringgit fell alongside regional Asian currencies yesterday, despite Asian stock markets closing higher and while there was lack of USD support, as sentiment turned cautious before the release of US inflation data this week. However, the ringgit remained within touching distance of 4.450. Traders await Malaysia’s GDP releases at end of week.

Other Markets

Gold: Gold rallied with rise over 1.5%, aided by sustained expectations the Fed will begin cutting rates next month. Expectations the US inflation data would come in largely in line with expectations was supportive for gold.

Crude oil: The crude market rallied on escalating Middle East geopolitical concerns amid news the US was increasing its military presence in the region. Crude also benefited from sustained expectations the Fed will start rate cuts next month.

Source: AmInvest Research - 13 Aug 2024