Snapshot Summary

Global FX: Dollar soared to a seven-week high on strong September jobs report

Global Rates: UST yields surged as NFP data impressed

MYR Bonds: Local govvies saw net selling pressure ahead of US jobs data release

USD/MYR: Ringgit traded within a tight range

Macro News

Global: The FAO Food Price Index rose by 3% m/m to reach 124.4 in September 2024, marking the largest monthly increase since March 2022 and the highest level since July 2023. Sugar prices surged by 10.4% m/m, primarily due to worries about tighter global supplies in the upcoming 2024/25 season. This increase was largely driven by deteriorating crop prospects in Brazil, caused by extended dry weather and fires that damaged sugarcane fields in late August, as well as concerns that India's sugar export availability might be impacted by the government's decision to ease restrictions on sugarcane use for ethanol production.

US: US Non-Farm Payrolls created 254k jobs in September 2024, significantly surpassing the upwardly revised figure of 159,000 for August and exceeding forecasts of 140k. Additionally, payroll figures for July were revised upward by 55k, moving from 89k to 144k, while August's numbers were also adjusted upward by 17k, from 142k to 159k. As a result of these revisions, combined employment figures for July and August are now 72k higher than previously reported. Unemployment rate in the US dropped to 4.1% in September 2024, the lowest level in three months, down from 4.2% the previous month.

Fixed Income

Global Bonds: On Friday, Treasury yields experienced their largest weekly surge in nearly two years, driven by a surprisingly strong September jobs report. The data revealed that the U.S. economy added 254k new jobs in September, significantly surpassing the market's expectation of 150k. Additionally, job numbers for both August and July were revised upward. The unemployment rate dipped slightly to 4.1% from 4.2%, and average hourly earnings grew by 4% over the past year. These stronger-than-anticipated job figures erased any expectations of a major Fed rate cut in November. The probability of a 50 bps rate cut next month dropped to zero from 32.1% the day before, while the chances of a smaller 25 bps cut surged to 98.9%, up from 67.9% according to the CME FedWatch Tool. The dollar has also been boosted last week by safe-haven demand on concerns about widening conflict in the Middle East.

MYR Government Bonds: Government bonds continued to see net selling pressure with risk appetite absent before the release of the US jobs report after hours Friday. Despite the lack of interest we still noted some defensive bids suspected to be done by onshore players. Today is tender closing for reopening of MGS 05/27, the current 3Y MGS benchmark. Amount is MYR4.5 billion with no private placement.

MYR Corporate Bonds: There was firmer interest in PDS papers last Friday despite the cautious govvies trading, and this was better than mostly net selling activity the day before. Friday saw pickup in some high grade names though there was also continued mixed/realignment along some other names. Notable trades include AA3 rated Edra 01/26 and 07/29 traded at 3.75% and 3.91% respectively.

Forex

US: On Friday, the dollar surged to a seven-week high and was set to mark its best weekly performance since September 2022, following an unexpectedly strong September jobs report. The robust labor data led traders to scale back their expectations for additional 50 bps rate cuts from the Federal Reserve. Chicago Fed President Austan Goolsbee described the report as "superb," noting that if similar labor market data continues, it would increase his confidence that the economy is achieving full employment with low inflation.

Europe: The euro fell its lowest point since 15 August, while the pound down to the lowest level since 12 September. On Friday, BoE chief economist Huw Pill suggested that the central bank should take a gradual approach to cutting rates. His comments came a day after the pound slid 1%, following Governor Andrew Bailey's statement that the BoE might take a more aggressive stance in lowering rates.

Asia Pacific: The yen weakened, nearing the 150 level, as markets were taken by surprise when Japan's new Prime Minister, Shigeru Ishiba, stated that the economy was not ready for further rate hikes. This marked a sharp reversal from his earlier stance, where he had supported the BoJ's efforts to unwind decades of aggressive monetary stimulus.

Malaysia: The ringgit was traded within a tight range as investors were on the sideline ahead of key US non-farm payrolls data. In addition, risk appetite was partly subdued amidst Middle East geopolitical tensions.

Other Markets

Gold: Gold prices fell sharply on Friday as the dollar and bond yields surged following a stronger-than-expected US jobs report. The data triggered a broad market reaction, pushing gold lower by 0.1% to USD2,654/oz in the latest trading.

Oil: Brent crude oil rose 0.6% on Friday, closing just above USD78 per barrel, marking the highest level in five weeks as concerns grew over potential supply disruptions in the Middle East.

Source: AmInvest Research - 7 Oct 2024