Snapshot Summary

Global FX: Dollar weakened against major currencies on weak US labour data

Global Rates: UST yields rose on Friday ahead of US elections

MYR Bonds: Trading sentiment in the local govvies remained soft

USD/MYR: The ringgit traded within tight range of 4.364-4.388

Macro News

Australia: Australia's final demand producer price index increased by 0.9% q/q in 3Q2024, following a 1.0% rise in the prior period, exceeding market expectations of 0.7%. It marked the 17th straight period of producer inflation, with main contributors to the growth coming from some components, notably the output of property operators (1.9%), boosted by fees linked to higher rents; residential building construction (0.9%), amid rising labor cost and ongoing labor shortages of skilled tradespeople.

Malaysia: S&P Global Malaysia Manufacturing PMI stood at 49.5 in October, consistent with the previous month. This marked the fifth consecutive month of contraction in manufacturing activity, maintaining the steepest decline since April. Factory output decreased for the fifth month in a row, with the rate of decline being the most significant in seven months.

United States: US non-farm payrolls (NFP) added only 12k jobs in October, below the downwardly revised total of 223k in September and falling short of forecasts of 113k. This marks the lowest job growth since December 2020, when 243k jobs were lost due to strikes at Boeing. It's possible that some industries experienced job losses in October due to hurricanes, although the Bureau of Labor Statistics (BLS) could not measure the net impact. The October figure is also notably lower than the average monthly gain of 194k over the past year. The ISM Manufacturing PMI unexpectedly dropped to 46.5 in October 2024, down from 47.2 in September and below the forecast of 47.6. This reading indicates another contraction in the manufacturing sector, the worst since July 2023, driven by weak demand, declining output, and favorable input conditions.

Fixed Income

Global Bonds: US Treasury yields initially fell early Friday after data showed that NFP rose by just 12k in October versus consensus expectations of about 113k. However, yields then rose from daily lows as markets speculated whether the weak NFP data owed to incidence of hurricanes in the US as well as impacted from job strikes. We think UST traders were also wary before this week's US elections.

MYR Government Bonds: The government bond market was trading in thin volume last Friday while trading sentiment remained soft stemming from UST yields sustained near recent highs across the maturities ahead of NFP and unemployment rate data releases as well as the cautious tone before the US election this week.

MYR Corporate Bonds: The ringgit corporate bond market was also lagging in interest last Friday to mirror the sentiment in the govvies space. We saw trades were mainly focused on the AA names. Leading the flows was short-dated UEM Sunrise 12/24 (AA-) which fell 5 bps 3.57% and Bank Islam IMTN 07/31 (AA3) which rose 15 bps to close at 4.06%.

Forex

US: On Friday, the US dollar strengthened against major currencies as traders assessed data indicating a significant slowdown in October's US job growth, possibly attributed mostly to one-off incidents such as hurricanes and aerospace industry strikes. Attention also turned to the upcoming US presidential election, with polls showing a tight race, and the Federal Reserve's monetary policy meeting scheduled shortly thereafter.

Europe: Some of the Eurozone's individual markets were closed in observing All Saints holiday but the common currency fell against the stronger dollar. The pound maintained its strength against the US dollar as worries over the UK budget subsided. Attention now shifts to this week's Bank of England policy meeting.

Asia Pacific: The Japanese yen weakened but the sentiment for further yen gains partly remains due to the recent BoJ Governor Kazuo Ueda's more hawkish comments after the central bank's decision to hold rates steady on Thursday. In China, the CNY eased despite the official PMI showed manufacturing sector activity has turned to growth.

Malaysia: Cautious sentiment remained as Asia currencies, including the ringgit, went lower last Friday ahead of key US job data. The MYR fell 0.1% on the day and traded within tight range of 4.364-4.388. On Friday, BNM addressed the ringgit's fluctuations, assuring that it stands ready to manage any excessive volatility and told markets to look beyond "short-term currency dynamics".

Other Markets

Gold: Gold held steady as the dollar and yields rebounded, recovering from earlier declines as the weak US jobs data may have owed to one-off occurrences during the month.

Oil: Oil's volatility caught attention amid rising concerns on potential oversupply and weak demand from China, alongside the impact of unrest in the Middle East.

Source: AmInvest Research - 4 Nov 2024