Snapshot Summary

Global FX: The dollar gains further grounds as investors await more US data and a slight downside in the global risk appetite

Global Rates: US Treasuries bull steepened as concerns over the US economy persist

MYR Bonds: The Malaysian government market was mostly flat yesterday, while flows in the PDS space were mixed

USD/MYR: Ringgit weakened again, in tandem with Asia currencies weaknesses

Macro News

United States: The ISM Manufacturing PMI rose slightly to 47.2 in August 2024, up from a low of 46.8 in November 2023, but fell short of market expectations of 47.5. This marks the 21st contraction in US factory activity over the past 22 months, highlighting the ongoing weakness in the manufacturing sector, largely due to the Federal Reserve's high interest rates. Respondents reported a continued decline in new orders, dropping to 44.6 from 47.4 in July, marking the third consecutive decrease. As a result, production decreased quicker, falling to 44.8 from 45.9.

Switzerland: Switzerland's GDP grew by 0.7% q/q in 2Q2024, marking the fastest economic expansion since the second quarter of 2022. This growth was primarily driven by the manufacturing sector, which saw a 2.6% q/q increase, and the services sector, particularly accommodation and food services, grew by 2.7%. On an annual basis, Switzerland's GDP grew by 1.8% y/y in Q2 of 2024, accelerating from a 0.6% rise in the previous quarter.

Fixed Income

Global Bonds: US Treasuries bull steepened as concerns over the US economy continued after the ISM Manufacturing Index remained in negative territory at 47.2 for August versus 46.8 in July. The gains come ahead of US jobs data this week, including Friday's NFP for August, where consensus is for a still relatively low, in our opinion, an increase of 160k versus 114k in July.

MYR Government Bonds: The Malaysian government market was mainly flat yesterday, ahead of more risky events this week. These include the US jobs data at the end of the week and the BNM MPC meeting, though the expectation is for the central bank to hold rates. The 3Y MGS rose 3 bps yesterday, while other benchmarks closed unchanged.

MYR Corporate Bonds: There were more flows in the corporate bond market yesterday, but it closed sideways. Amongst the large volumes yesterday was AA1 Maybank subordinated 01/34, which fell 1 bps to 3.98%. Also seen was AAA-rated Toyota Cap 08/30, which closed unchanged at 3.94%.

Forex

United States: The dollar (DXY Index) held its gains overnight and reached the 102 level. Prior to the ISM Manufacturing PMI data, the dollar gave up its ground. However, after data was released, which came in lower than expected, the dollar erased its losses to trade slightly higher than when it opened. This may suggest that traders waiting for labour market data for their next move have already priced in the overall US manufacturing weakness. Risk sentiments were slightly sour as stock markets closed in red and commodities fell.

Europe: The lack of data drive meant the dollar movements dictated the EUR and GBP movements. The euro fell 0.3%, while the GBP shed 0.2%. In Switzerland, the inflation rate eased to 1.1% y/y for August, while 2Q2024 GDP surprised the upside at 0.7% q/q vs consensus 0.5% q/q.

Asia Pacific: The Japanese yen rallied 1.0% the day after BoJ Governor Kazuo Ueda signalled that the central bank will continue raising interest rates if the economy and prices align with the central bank's forecasts. On the other hand, both the CNY and the AUD closed weaker amidst a slightly risk-off mode.

Malaysia: With weaknesses among Asian currencies, the MYR weakened by 0.3%, approaching the 4.40 level ahead of the BNM meeting and key US labour market data. The ringgit is currently in a consolidation trend as investors await more clues on the US Fed rate path.

Other Markets

Gold: Gold fell ahead of US employment data due later this week. The precious metal slipped 0.3% to USD2,493/oz.

Crude oil: Oil sank, with Brent falling 4.9% and WTI dropping 4.4%, erasing its gains for the year, after a hopeful deal to restore supplies from Libya calmed traders' nerves.

Source: AmInvest Research - 5 Sep 2024