Snapshot Summary

Global FX: Dollar snapped its near three-month high

Global Rates: US treasuries consolidated after yields found highs around 4.25%

MYR Bonds: Local govvies were stable in tandem with consolidating UST market

USD/MYR: Ringgit closed at 4.348 after paring some of the prior session's losses

Macro News

Germany: The HCOB Flash Manufacturing PMI for Germany increased to 42.6 in October from September's low of 40.6, the lowest reading in nearly a year while surpassing projections of 40.8. However, the PMI still indicates a significant contraction in the economy's manufacturing sector.

Malaysia: The annual inflation rate fell slightly to 1.8% in September, below expectations of 1.9%, which was also the rate from the previous month. Core consumer prices increased by 1.8% y/y, representing the slowest growth in six months.

UK: The flash S&P Global UK Composite PMI index fell to 51.7 in October from 52.6 in September, reaching its lowest point in 11 months. This suggests only modest growth in private sector output, slower than the pace observed in 3Q2024. Meanwhile, services activity experienced a slightly faster growth than manufacturing.

US: US initial jobless claims decreased by 15k to 227k, marking the lowest level since the beginning of the month. This figure is significantly below market expectations, which had anticipated claims would remain at 242k. New home sales rose by 4.1% m/m in September, reaching a seasonally adjusted annual rate of 738k, the highest level since May 2023. This increase followed a downwardly revised figure of 709k in August, surpassing forecasts of 720k.

Fixed Income

Global Bonds: US Treasuries consolidated after yields found highs around 4.25%. There might have been some bargain-hunting interest at play, seeing the more attractive yields as the Fed is still expected to cut rates well into next year. US data on Thursday continue to be stronger biased for growth, including US PMI reading and weekly jobless claims. Bund yields fell on a print of weaker Eurozone PMI overnight.

MYR Government Bonds: The Malaysian government was more stable yesterday in tandem with consolidation in the UST market after yields found highs near 4.25% yesterday. The release of soft flash PMI in Europe also aided sentiment in the safe-haven govvies. Elsewhere, onshore players await details for reopening the 7Y GII, with an issuance size of at least MYR4.5 billion.

MYR Corporate Bonds: Lacklustre performance in the corporate bond space continued yesterday, awaiting better interest in the govvies market. Flows were heavier on the AA curves amid the lack of interest. Notable trades included AA2-rated Renikola II 09/37, which was unchanged at 4.24%, while Renikola II 09/40 fell 18 bps to close at 4.35%.

Forex

US: On Thursday, the dollar index shed 0.4% after it rallied to a near three-month high, in tandem with the drop in T-note yields and amidst suspected profit-taking. This came despite U.S. data indicating continued economic resilience, with weekly jobless claims coming in lower than expected and stronger results in both the October S&P manufacturing PMI and September new home sales, which could potentially encourage a more hawkish approach from the Fed.

Europe: Euro buyers gained some ground against sellers as the USD weakened. Although the PMI survey indicated another drop in the eurozone's business activity in October, the contraction in Germany, the region's largest economy, was not as severe as the previous month. However, the sentiment surrounding the common currency continues to be on the downside due to the differing stances between Fed officials and the ECB, with several ECB policymakers voicing concerns about the risk of falling short of the central bank's 2% inflation target. Meanwhile, private business activity in the UK grew slower than the previous month.

Asia Pacific: Asian currencies also paused their bearish run on Thursday. The JPY strengthened 0.6% amidst the dollar's fall and warnings from Japan's Ministry of Finance against currency speculation, raising concerns about the "one-sided, rapid" movements in the currency market that have contributed to the yen's depreciation. Meanwhile, the Chinese yuan increased by 0.1% to close at 7.120.

Malaysia: The ringgit pared some of the prior session's losses and finished Thursday at 4.348. Yesterday's inflation figure for September slowed down further to 1.8% y/y, down from 1.9% y/y, risking a deflationary environment, which could pressure the BNM to cut interest rates amidst global easing policy.

Other Markets

Gold: Gold prices rose as the dollar weakened and UST yields declined. The precious metal price climbed 0.8% to USD/2,736oz.

Oil: Crude oil declined for the second consecutive day, remaining within a narrow range as investors weighed rising US inventories and strong supply factors against the tensions in the Middle East and uncertainty surrounding the US presidential election.

Palm Oil: Palm oil price was sustained near recent highs amid ongoing worries over supply. According to the Indonesian Palm Oil Association, Indonesia's palm oil output may only reach 51 million metric tons this year from 54.8 million in 2023 due to impacts from the El Niño weather. Aside from 1 November 2024, the Malaysian export duty schedule will include additional export taxes on CPO prices of between MYR 3,601 and RM3,750 per metric ton that is subject to an export duty of 8.5%, followed by MYR3,751-RM3,900 at 9%, MYR3,901-RM4,050 (9.5%); and more than MYR4,050 (10%).

Source: AmInvest Research - 25 Oct 2024