Snapshot Summary

Global FX: The dollar found support from US PMI readings

Global Rates: Yields in a tight range on Fed-talk ahead of auctions

MYR Bonds: Malaysia's government bonds closed mixed as the boost from MYR was less seen yesterday

USD/MYR: Ringgit seemed to be in consolidation after breaking 4.200

Macro News

Malaysia: Malaysia's annual inflation rate surprisingly fell to +1.9% in August, below expectations of 2.0%, and the same rate was recorded over the previous three months. This marks the lowest inflation rate since April, signalling soft demand conditions. Core consumer prices, which exclude fresh food prices and administered costs, rose 1.9% y/y, unchanged for the fifth consecutive month and marking the highest increase since December 2023.

UK: S&P Global UK Composite PMI dropped to 52.9 in September, down from 53.8 in August, falling short of expectations of 53.5. Despite this decline, the index marked the 11th consecutive month of growth in private economic activity. This strong economic performance contrasted with the Eurozone's contraction, supported by the services sector (52.8 compared to 53.7 in August) and the manufacturing sector (51.5, down from 52.5).

US: The US S&P Global Flash Composite PMI dipped to 54.4 in September from 54.6 in August, surpassing estimates of 54.3. This indicates that growth in business activity within the US private sector remains strong, suggesting continued economic expansion in the third quarter. Though the services sector showed robust growth, it slightly slowed (55.4 compared to 55.7), and the manufacturing sector saw a deeper contraction (47 versus 47.9). Additionally, there was a slowdown in order book growth and a decline in business expectations for the upcoming year, reaching a near two-year low, reflecting increased uncertainty ahead of the Presidential Election.

Fixed Income

Global Bonds: US Treasuries were flat, with benchmark 2Y and 10Y closing slightly changed. The continued decline in global crude oil prices, which eased the inflation outlook, aided Treasuries, but on the flip side, some anticipation of de-escalation in Middle East tensions eased recent safe-haven demand. Comments from Fed officials Raphael Bostic (Atlanta Fed) and Neel Kashkari (Minneapolis) against more than half percentage point cuts further pressured Treasuries. Meanwhile, the market readies for USD69 billion sale of the 2Y, USD70 billion of the 5Y and USD44 billion of 7Y notes this week.

MYR Government Bonds: Boost from the strong MYR was less seen yesterday as bonds closed mixed with some losses on the front of the curve. The longer part of the curve closed flat as the August CPI dipped to 1.9%.

MYR Corporate Bonds: Yesterday, there was mixed showing in the PDS space to follow the general movement in the govvies space. Flows were mixed amongst AAA and AA papers. Heavier trading was heard on papers such as Benih Restu 07/34 (AA2), which was unchanged at 4.00%, and Air Selangor 04/33 (AAA), which shed 3 bps to close at 3.87%.

Forex

US: To start the week, the dollar posted further gains to finish Monday at 100.85. Data released during the day (flash PMI) showed that private businesses, led by the services sector, continue to grow. On the other hand, the decline in the manufacturing sector deepened. Meanwhile, there were mixed signals from Fed officials. Atlanta Fed President Bostic said he agreed to normalise monetary policy sooner than initial expectations, while Minneapolis Fed Kashkari said smaller steps are appropriate unless the data changes materially.

Europe: We noted that the flash PMI in France, Germany and the Eurozone all came in disappointingly low, suggesting more rate cuts may needed by the ECB to prop up the economy, and the key rates may need to go down further and faster than that of the Fed. In contrast, private business activity in the UK continues to grow in September, albeit slower than the prior month. These diverging data explain Monday's differing performance between the EUR and GBP.

Asia Pacific: The CNY took a break from the recent bull run due to the heightening global trade tension. Due to security concerns, the US is expected to announce more bans on Chinese software and hardware connected to EVs on American roads. The latest large rate cut by the US prompted corporates to sell the dollar and buy the yuan despite, on a fundamental level, conditions (interest rate differential, growth concerns) arguing for a weakening yuan in the longer term. In Japan, the JPY stabilised after the BoJ decision to hold its rate last Friday.

Malaysia: The Ringgit now seems to be in a consolidation range after the sharp appreciation from above the 4.30 level towards the 4.20 level in a matter of less than ten trading sessions. Yesterday's inflation data shows tepid readings despite the government's exercise of subsidy rationalisation over the past few months.

Other Markets

Gold: Gold rose modestly, up 0.3% to USD2,629 per oz. Sentiment remained buoyed by expectations of more Fed cuts, though the quantum of another bumper 50 cut may not be on the horizon.

Oil: Oil prices slipped further due to continued profit-taking activity after the FOMC cut. However, risks remain from broader conflicts in the Middle East.

Source: AmInvest Research - 24 Sep 2024