Snapshot Summary

Global FX: The DXY index was relatively flat and traded within a tight range.

Global Rates: Treasuries staged a rally on Tuesday amid persistent worries over global growth and cautious play before the US CPI release.

MYR Bonds: Trading was marked by net selling activity countered by bargain-hunting interest.

USD/MYR: Ringgit merely moved with its technical range, ahead of US CPI.

Macro News

Australia: Australia's Westpac-Melbourne Institute Consumer Sentiment index fell by 0.5% m/m to 84.6 in September 2024, reversing the 2.8% increase seen in August, marking the sixth decline this year. This drop reflects a more cautious economic outlook following sluggish GDP growth in 2Q, raising concerns about potential job losses.

China: China's trade surplus soared to USD 91.0 billion in August, exceeding expectations of USD 83.9 billion as exports grew significantly faster by 8.7% y/y. Imports rose by 0.5% y/y, a sharp decline from July's 7.2% growth, reflecting weak domestic demand.

Malaysia: The IPI rose by 5.3% y/y in July, up from a 5.0% rise the previous month and ahead of expectations of +4.5%. This marked the strongest growth in three months, driven by significant manufacturing and electricity production gains.

UK: Unemployment fell to 4.1% in July, down from 4.2% in the previous three-month period, which aligns with expectations. This represents the lowest rate since the end of January, with the unemployed down by 74k to 1.44 million.

Fixed Income

Global Bonds: Treasuries staged a rally on Tuesday amid persistent worries over global growth, including concerns over China and signals from falling oil prices. Meanwhile, the market saw firm demand at the USD58 billion 3Y UST auction, where bid-cover was 2.66x vs 2.55x at the same auction last month. In the meantime, Bunds also gained with the 10Y down 4 bps to 2.13% as Germany reported CPI at -0.1% m/m in August, meeting expectations.

MYR Government Bonds: It was another day of MGS trading lacking direction, though we noted some net selling pressure on shorter-dated papers. We think some defensive play also countered any net selling pressure as some traders picked up papers on the higher yield bounce. We think there was some bond pickup as traders tread cautiously ahead of today's US CPI release.

MYR Corporate Bonds: Trading in the corporate bond market was slightly firmer yesterday, led by a pickup of select AAA higher-grade names and some power sector names. There was realignment on some AAA Tenaga papers where Tenaga 08/40 fell 18 bps to 4.06% (-18 bps) while Tenaga 08/38 was unchanged at 4.04%, and Tenaga 08/37 rose to 4.06% (+3 bps). Meanwhile, Edra Energy 01/32 (AA3) fell 10 bps to 3.99%, but Edra Energy 07/32 closed unchanged at 4.00%.

Forex

US: The DXY index was relatively flat and traded within a tight range on Tuesday, holding the narrative that the dollar is still within consolidation range as traders brace for the key US CPI data. On another note, data last night showed small business optimism has soured, and future expectations have deteriorated in the wake of the US elections soon in November. We are keeping an eye on the Trump-Harris presidential debate for clues about the greenback's strength.

Europe: At the same time, the EUR fell marginally by 0.1% as the focus for the euro area is currently on the upcoming ECB meeting. In the UK, the pound was steadier following healthy employment growth despite the further slowing wage growth.

Asia Pacific: The yen firmed by 0.5%. Recent GDP print has thrown doubts over the BoJ's plan to raise interest rates; the market is not pricing the key rates to move when officials meet next week. In China, the yuan eased against the stronger dollar, but losses were capped by healthy export data, which beat forecasts. The Aussie dollar dipped after both consumer and business sentiment data waned.

Malaysia: In tandem with the dollar, the ringgit remained in technical range mode, perhaps waiting for an evident rate cut by the Fed for the leg to go higher. Some good news came from the domestic front as Malaysia's industrial production for July grew faster at 5.3% y/y vs expectations of 4.5% y/y.

Other Markets

Gold: The precious metal edged higher, gaining 0.4% to close as the US dollar was relatively muted while the UST yields fell. Gold remained buoyed by the expectations for an imminent rate cut by the US Fed during the upcoming September meeting.

Oil: Both Brent and WTI further eased to reach their lowest in three years, underpinned by concerns over China demand and downward revised demand forecasts by the EIA and OPEC. A rather sharp drop, in our view. OPEC said global demand will rise by 2.03 million bpd in 2024, but down from its previous forecast for growth of 2.11 million bpd. OPEC then cut its 2025 demand growth forecast to 1.74 million bpd from 1.78 million bpd. However, the EIA sees firm 2024 global oil demand at an average of 103.1 million bpd, vs the previous forecast of 102.9 million bpd.

Source: AmInvest Research - 11 Sep 2024