Snapshot Summary

Global FX: USD hovered near its highest level in seven weeks

Global Rates: US Treasury yields back above 4.00%

MYR Bonds: Benchmark papers up as much as 6 bps yesterday

USD/MYR: Ringgit continued to weaken and reaching its lowest level since mid-September

Macro News

Eurozone: Retail sales in the Euro area rose by 0.2% m/m in August compared to the previous month, following a revised flat reading in July, aligning with market expectations. Sales for automotive fuel in specialized stores increased by 1.1% m/m (up from -0.6% in July), while non-food product sales grew by 0.3% m/m (compared to -0.1%). Retail volumes also saw a rise in food, drink, and tobacco products, increasing by 0.2% from 0.1%. Y/y, retail sales in the Euro Area increased by 0.8%.

Germany: Germany reported factory orders fell by 5.8% m/m in August when expectations were for a much smaller drop of 2.0% m/m. The weak data emphasized continued struggles of the German economy, and today we have Germany's industrial output data to be released, at consensus expectation of a small 0.8% rise though against the 2.4% m/m decline in July.

Fixed Income

Global Bonds: US Treasuries weakened slightly but yields were again back above 4.00% amid vast reduction in expectations of another large incoming Fed rate cut. The UST market was also anxious preparing for USD119 billion total auctions of 3Y, 10Y and 30Y papers this week. The lowered rate cut expectations briefly reinverted the curve overnight.

MYR Government Bonds: Government bond market in Malaysia weakened with benchmark papers up as much as 6 bps yesterday. Driver was the losses in global bonds and weaker MYR on the back of strong US jobs data last Friday. The sentiment affected yesterday's 3Y MGS auction where BTC was 1.61x for the MYR4.5 billion issuance.

MYR Corporate Bonds: Corporate bonds also mostly weakened yesterday. However, only select names with a lack of higher rated AAA papers were seen being dealt. Losses include Imtiaz 10/28 (AA2) which rose 4 bps to 3.84% and IJM 08/28 (AA3) at 3.78% which rose 2 bps.

Forex

US: USD hovered near its highest level in seven weeks on Monday, as traders reconsidered their positions following last week's robust employment data, coupled with concerns that tensions in the Middle East could escalate into a broader conflict. According to CME FedWatch tool, there is an 85% chance of a quarter-point cut being priced in, compared to 47% a week ago, while the probability of no cut at all stands at a slim 0.15%.

Europe: The euro barely moved, weighed down by a sharper-than-anticipated drop in German factory orders for August. This added to growing evidence that manufacturing in Europe's largest economy continues to struggle. Meanwhile, the British pound declined following a rough week after Bank of England Governor Andrew Bailey suggested that the central bank might take more aggressive measures to cut borrowing costs.

Asia Pacific: In Japan, the JPY strengthened after Japan's top currency diplomat, Atsushi Mimura, issued a warning against speculative moves in the foreign exchange market. The offshore yuan steadied at approximately 7.019 per dollar as China's National Day holiday drew to a close. However, there is a pressure for the yuan to be weaker amidst pricing readjustments to the Fed outlook.

Malaysia: Despite the slight advance in emerging Asia equities, ringgit continued to weaken to reach 4.289, its lowest level since mid-September. This week, we have Malaysia's industrial production data to digest but we expect greater driver will be emphasized on the upcoming US inflation data.

Other Markets

Gold: Prices slipped on Monday, marking their second consecutive day of decline. The drop came as Friday's strong US employment report dampened hopes for another substantial US rate cut.

Oil: Prices extended its upward trend on Monday, rising for a fifth consecutive session. The gains were fuelled by mounting expectations that Israel is preparing to retaliate against Iran after last week's missile attack, intensifying fears of a broader Middle Eastern conflict that could jeopardize oil supplies from the Persian Gulf.

Source: AmInvest Research - 8 Oct 2024