Snapshot Summary

Global FX: Dollar falls but completed the strongest month since 2022

Global Rates: US Treasury yields rose on Thursday with front end papers seen near their highest levels in three months

MYR Bonds: Malaysian government bond market closed mixed on Wednesday ahead of the Deepavali break

USD/MYR: The ringgit closed Wednesday at 4.378 ahead of local holiday

Macro News

Australia: Australia's monthly Consumer Price Index (CPI) rose by 2.1% m/m in September, falling short of market expectations of 2.4% and down from August's 2.7%. This marks the lowest level since July 2021, keeping inflation within the central bank's target range of 2 to 3% for the second month in a row, primarily due to the continued effects of the Energy Bill Relief Fund rebate.

Japan: The Bank of Japan (BoJ) unanimously decided to keep its key short-term interest rate at approximately 0.25% in October, the highest level since 2008, aligning with market expectations. This decision was made against a backdrop of a changing political landscape following Japan's recent election and in anticipation of the upcoming US presidential election.

Eurozone: Eurozone's annual inflation rate rose to 2% in October, up from 1.7% in the previous month, which had marked the lowest level since April 2021. This increase was slightly above the forecast of 1.9%. The year-end rise was largely anticipated due to base effects, as last year's significant drops in energy prices are no longer considered in the annual calculations. The annual core inflation rate held steady at 2.7%, the lowest since February 2022, but still above the forecast of 2.6%.

United States: US PCE index rose by 0.2% m/m in September, following a 0.1% increase in August, which aligned with expectations. Prices for services increased by 0.3% m/m, while goods prices dipped by 0.1% m/m. The core PCE index, saw a 0.3% m/m rise, marking the highest increase in five months after an upwardly revised 0.2% gain in August, also meeting expectations.

United Kingdom: In efforts to boost the economy, the UK budget presented by Chancellor of the Exchequer stated stimulus which included additional GBP90 billion annual increase in public spending plus GBP100 billion addition to capital expenditure. The budget suggests additional GBP142 billion of government borrowing to be done over the next five years. The budget also states GBP40 billion in tax increases.

Fixed Income

Global Bonds: US Treasury yields rose on Thursday with front end papers seen near their highest levels in three months. There was caution in the market ahead of today's non-farm payrolls data release. The PCE price index up by 0.2% in September added to the weak UST sentiment on Thursday after an unrevised 0.1% rise in August. UST yields also rose in tandem with rise in Gilt yields after the UK budget presentation suggests a rise in stimulus and government borrowings.

MYR Government Bonds: Malaysian government bond market closed mixed on Wednesday ahead of the Deepavali break, snapping recent losses as UST market saw a slight dip in yields the day before. Nevertheless, we think trading could be cautious today ahead of the October non-farm payrolls release.

MYR Corporate Bonds: Sentiment in the ringgit corporate bond market remained weak. We noted AAA papers leading the losses, denoting the cautious sentiment ahead of the US jobs report on Friday and key events in the coming week including the US elections. Notable trades included AAA Tenaga 06/29 and 06/32 up 8 bps and 13 bps respectively. AAA Air Selangor 10/28 and 09/32 rose 13 bps and 3 bps respectively.

Forex

US: The US dollar declined on Thursday as the slightly higher PCE Price Index was well within the market's forecast and US GDP data from the prior day was revised lower to 2.8% q/q. Nonetheless, the DXY index set the highest monthly gains for October 2024 since September 2022, thanks to the robust US economy which is deterring expectations of Federal Reserve rate cuts.

Europe: The euro climbed 0.2%. Flash inflation data showed consumer prices rose 2.0% y/y, higher than expectations but remain within ECB target. On the other hand, the pound dropped by 0.5%, reaching its lowest point since mid-August as UK bonds plummeted, continuing a selloff due to the Labour government's borrowing and fiscal stimulus plans for the upcoming years, which the market deemed as excessive.

Asia Pacific: The USD/JPY pair dropped by 0.9% after the Bank of Japan kept its interest rate unchanged but hinted at a future rate hike. Governor Kazuo Ueda reinforced this outlook, stating that Japan's political situation would not prevent rate increases if economic conditions align with the central bank's forecasts. In China, the CNY closed at 7.118. The currency concluded the weakest month in over a year due to a strong dollar and rising market expectations of a Trump victory. Meanwhile, China's factory activity unexpectedly grew after five months of contraction, indicating that recent stimulus measures might be starting to enhance growth momentum.

Malaysia: The USD/MYR pair retraced some of its gains and ended Wednesday at 4.378 though trading range was wide ahead of the Deepavali holiday on Thursday.

Other Markets

Gold: Gold retreated as some traders booked profit after the metal's rally to a fresh record. The precious metal price dropped 1.6% to USD2,744/oz.

Oil: Both Brent and WTI went up by 0.8% and 0.9%, respectively, following reports that Iran might be planning a new attack on Israel, raising concerns among markets about potential supply disruptions from the Middle East.

Source: AmInvest Research - 1 Nov 2024