Snapshot Summary...

Global FX: The dollar ended lower on the back of PPI data

Global Rates: German government bonds yield rose as ECB cut rates

MYR Bonds: Local govvies held steady as traders keep fresh bets on hold

USD/MYR: Ringgit traded within a tight range following US CPI data

Macro News

Japan: Japan's PPI rose by 2.5% y/y in August 2024, a slowdown from the previous month's 3.0% increase, falling below the market expectation of 2.8%. This marked the lowest level of producer inflation since May, driven by reduced costs in several sectors including beverages and foods (2.1% compared to 2.3% in July) and other manufacturing (2.9% versus 3.7% in July).

Eurozone: The European Central Bank (ECB) reduced the deposit facility rate by 25 bps to 3.5% in an effort to ease monetary policy restrictions, reflecting an updated outlook on inflation and improved policy transmission. As announced back in March 2024, in operational framework review, the spread between the main refinancing operations (MRO) and the deposit facility rate is revised to 15 bps and the spread between the marginal lending facility (MLF) and main refinancing operations will remain unchanged at 25 bps. Accordingly, the level of all three interest rates will be at 3.50% for deposit facility rate, 3.65% for MRO and 3.90% for MLF.

United States: US PPI rose by 0.2% m/m in August 2024, following a downwardly adjusted flat reading in July.

US initial jobless claims increased by 2,000 to 230,000 for the week ending September 7th, matching market expectations. This figure remains significantly higher than the averages observed earlier this year, indicating a persistent softening in the labour market, further highlighted by weak payroll data for August.

Fixed Income

Global Bonds: German government bonds saw yields up slightly overnight as the ECB cut rates for a second time. ECB officials signalled that there remains room for flexibility in incoming decisions as growth risks remain but inflation is now near the 2% level. US Treasuries weakened slightly amid expectations the Fed will start with a gradual cut in rates next week. Meanwhile, traders reacted to the modestly higher than expected PPI data.

MYR Government Bonds: Malaysia’s government bonds held steady yesterday with the front of the curve little changed. Traders seemed to keep fresh bets on hold amid the global central bank meetings. The ringgit holding steady yesterday also kept a lid on bonds trading

MYR Corporate Bonds: Corporate bonds continues to traded mixed, amid the cautious global markets especially ahead of FOMC meeting next week. A few names appeared in the secondary trading and we noted papers traded were led by banking and utilities ones. Of these, AAA rated BSN IMTN 03/26 was dealt 4 bps down to 3.68%, while on the AA3 curve we saw realignment on Edra Energy where its 07/36 shed 10 bps to 4.15% and 01/37 dealt unchanged at 4.17%.

Forex

US: The dollar index held steady around 101.7-level, before grinded lower to end the day near the 101.3 level, pressured by the mostly in-line PPI data and slightly higher initial jobless claims. Some risk-on mode observed as the US stock markets closed in green across the board. But the measure for the dollar remains within our weekly range of 100.5 - 102.0 when we built up view in our weekly report.

Europe: Both the euro and British pound rose 0.6% on the day. Supports for the former came from ECB's decision to cut the deposit facility rate by 25 bps, as widely expected. The lack of future guidance and its President Christine Lagarde's reiteration to data-dependent policymaking, caused some readjustment in the market pricing which was expecting a dovish cut. However, downward revision for the region's GDP may suggest that the central bank is poised to cut its interest rate further later on.

Asia Pacific: Data flow from Japan on Thursday were rather mixed, clouding assumptions that the BoJ would further raise its interest rates. The producer inflation unexpectedly declined by 0.2% m/m but large manufacturers survey index turned positives for the third quarter 2024 after it dipped into negative during the 1H2024. Currency traders digested the good news more as the JPY firmed 0.4%. In China, the yuan was stable at 7.11-level despite the lower dollar as the sentiment surrounding China's growth remained tilted towards the downside.

Malaysia: The ringgit was traded within tight range of 4.331 - 4.344 following US inflation data which suggests the Fed is slated to start easing with a narrower rate cut rather than a jumbo one. But the USD/MYR leg could be pushed lower moving forward especially when the Fed does cut its rate next week.

Other Markets

Gold: The precious metal posted another record high of USD2,557/oz as the market digested an uptick on initial jobless claims yesterday, which further nailed on the door for an imminent rate cut next week.

Oil: Oil prices climbed for the second day, with Brent bounced off further from USD69 per barrel region and WTI rose to close at USD69 per barrel. The higher oil price was supported by supply concerns amidst natural disaster news flow reported storm Francine disrupted crude production in the Gulf of Mexico.

Source: AmInvest Research - 13 Sep 2024