Snapshot Summary…

Global FX: The dollar was fuelled by release of upbeat US retail sales data

Global Rates: UST yields rose after the release of US economic data

MYR Bonds: Local govvies softened as a result of profit-taking activities

USD/MYR: The Ringgit reversed from 16-month highs

Macro News

Australia: Australia's unemployment rate increased to 4.2% m/m in July 2024, marking the highest level since January 2022. The number of individuals without jobs increased to 637,100, with both full-time and part-time job seekers contributing to this rise. On the positive side, employment saw a significant surge of 58,200, reaching a total of 14.47 million, with most of the increase coming from full-time positions.

China: China's retail sales exhibited a growth of 2.7% y/y in July 2024, surpassing market expectations of 2.6% and showing an acceleration from June's 2.0% increase, which was a 17-month low. This growth trend marked the 18th consecutive month of expansion in the retail sector.

China’s unemployment rate rose to 5.2% y/y in July 2024, slightly exceeding market expectations of 5.1%.

United Kingdom: UK’s GDP recorded 0% m/m growth in June 2024, compared to the previous month’s 0.4%, aligning with market expectations. The services sector experienced a decline of 0.1%, breaking a streak of five consecutive monthly increases. The main contributors to this decline were retail trade, excluding motor vehicles and motorcycles (-1.2%), and human health activities (-1.5%), while professional, scientific, and technical activities saw a modest increase of 0.1%.

United States: Retail sales in the US surged by 1% m/m in July 2024, rebounding from a revised 0.2% decline in June and surpassing expectations of a 0.3% increase. This marked the largest growth since January 2023, with sales at motor vehicle and parts dealers seeing the biggest increase at 3.6% m/m, followed by electronics and appliance stores at 1.6% m/m.

The number of individuals seeking unemployment benefits in the US decreased by 7,000 to 227,000 during the week ending on August 10th. This contrasted with the market's prediction of a slight rise to 235,000. It marked the second consecutive weekly drop after hitting a nearly one-year peak of 250,000 at the end of July.

Fixed Income

Global bonds: The UST yields gets a lift and noticeably flattened after the market was jolted by US retail sales and initial jobless claims last night exhibited an upside surprise, beating market consensus. The 2Y yield surged 13 bps by the end of Thursday session while the 10Y yield rose 8 bps. Players also seemed to have paredfurther down expectations for a jumbo 50 bps rate cut during the upcoming September meeting. CME FedWatch tools showed the probability for the said quantum to happen is around 25% post retail sales data, down from 36% in the prior day and 55% last week. Across the Atlantic, both Bunds and Gilts curve bear flattened as well and retraced back some of their prior gains. The 10Y Bund yield climbed 8 bps and Gilts 10Y rose around 10 bps.

MYR Government Bonds: We noted local bond markets softened as market participants took profit from the recent rally despite US CPI came in slightly below consensus. The trading activities mainly revolved around the front to belly part of the curve while little was done on the back end of the curve. Meanwhile, the risk-on sentiment seems fading as we saw IRS traded slightly higher across all tenures with 5Y last traded by circa 2 bps higher.

MYR Corporate Bonds: To follow the weaker sentiment in the govvies space, trading flow within corporate space was subdued at MYR323 million, down from MYR740 million in the prior day. Nonetheless, we still see traders raked up higher grade papers throughout the session. Among notable trades were MYR40 million on PTPTN 03/37 (GG) done at 3.934%, MYR30 million on Infracap Resources 04/29 (AAA-S) done at 3.798%, and MYR20 million on BGSM Management (AA3) 12/30 done at 3.989%.

Forex

United States: The dollar index saw a 0.4% increase, fueled by robust US economic data which led to an 8 bps increase in the 10Y Treasury yields. As a result of these positive economic indicators, market expectations for a 50bps cut by the Fed at the upcoming September 17-18 FOMC meeting decreased from 75% to 26%.

Europe: GBP rallied and was supported by firm UK data. These comprised better numbers for UK GDP and manufacturing output. Aside, the EUR slipped versus the strong USD. The EUR was coming down from yearly highs, lifted recently by Fed cut(s) outlook and USD decline.

Asia Pacific: Mixed economic data saw the yuan weaker yesterday. Weak data comprised declines in home prices and industrial production as well as rise in the unemployment rate. However, China reported retail sales growth was stronger. Aside, overnight release of firm US data which aided the dollar as it then contained the Fed easing outlook supported the yen as prospects for runaway US cuts subsided and eased the outlook for faster reversal of the yen carry trades. Moreover, Japan reported better than expected and positive 2Q2024 GDP growth after the prior quarter decline. The AUD was lifted by rise in the employment rate.

Malaysia: The ringgit weakened as the USD/MYR posted 0.4% rise to close yesterday at 4.438. Movement was mainly suspected to a rebound lower for the ringgit after it this week touched around a 16-month high. There might be some cautious movement further today, ahead of the afternoon release of the 2Q2024 GDP.

Other Markets

Gold: Gold edged higher, up by 0.4% overnight. The metal was aided by ongoing safe haven demand amid geopolitical concerns and overnight upbeat US data and rise in UST yields.

Crude oil: Brent price was lifted after release of the better-than-expected US retail sales figures and lower US weekly jobless claims. Ongoing geopolitical concerns also remained as boost to crude oil. Gains were limited after EIA reported a rise in US inventories, up by 1.357 million barrels last week.

Source: AmInvest Research - 16 Aug 2024