Snapshot Summary

Global FX: The dollar opened Thursday on weaker footing, but later on turned bullish

Global Rates: Safe-haven demand amid geopolitical risks lent support to US Treasuries but yield downside was reversed

MYR Bonds: Some support for the MGS market were seen following the cancellation of the next scheduled GII auction and consolidation in global rates

USD/MYR: Ringgit firmed slightly and grinding away from the more than two months low it reached last week

Macro News

United States: US initial jobless claims decreased by 6k from the previous week to 213k for the week ending 16 November, marking the lowest level since April and significantly below expectations of an increase to 220k.

The Philadelphia Fed Manufacturing Index US fell unexpectedly to -5.5 in November 2024, down from 10.3 in October and well below the anticipated 8. This marks the second negative reading since January, signalling a general slowdown in manufacturing activity in the region.

In October 2024, US existing home sales rose by 3.5% to an annualized rate of 3.96 million, rebounding from a 14-year low. The median sales price increased by 4% to USD407,200, and inventory rose slightly.

Fixed Income

Global Bonds: Safe-haven demand amid geopolitical risks lent support to US Treasuries but yield downside was reversed and levels remain near recent highs as players are also awaiting more US macro data ahead, including jobs data though that comes as we cross into December. Decline in weekly new filings for jobless benefits overnight contributed to the sustained yields.

MYR Government Bonds: The geopolitical tensions involving Russia versus US allies and noted cancelling of the final GII auction this year were positive drivers for the MGS market in our opinion. These led to support for the MGS market yesterday though the front of the curve came under profit taking pressure.

MYR Corporate Bonds: Corporate bond trading saw less net selling activity yesterday though realignment on select names still occurred where yields on these tranches moved mixed. The realignment was seen on names such as CIMB where its T2 subordinated sukuk 09/32 (AA2) (callable in 2027) rose 5 bps to 3.94% but the 10/33 tranche (callable in 2028) fell 12 bps to 3.99%.

Forex

United States: The dollar opened Thursday on weaker footing, but later on turned bullish to go along with higher UST yields, supported by a stronger-than-expected labor market data as initial jobless claims fell to a 6.5-month low. Mixed data included weaker Philadelphia Fed index and leading indicators, and stronger home sales. Markets maintained their pricing of lower than 60% chance of a 25-bps rate cut in December. On another note, Fed officials' speeches were mixed; New York Fed President Williams expects inflation to cool and that rates will fall further, while Richmond Fed President Barkin warned of increased US vulnerability to inflation shocks. Chicago Fed President Goolsbee supported further rate cuts, with openness to a gradual approach. There were also some safe haven bid amidst the escalation in the Eastern European conflict.

Europe: The euro was pushed below 1.05 for the first time since October 2023 amidst dollar strength. The currency was also pressured by dovish official speeches; ECB Governing Council member Yannis Stournaras advocated for rate cuts at every meeting until reaching a neutral rate, estimated at around 2%, citing current inflation and economic conditions. François Villeroy de Galhau, a member of the ECB Governing Council, stated that potential trade levies during a second Donald Trump presidency would not disrupt the ECB's plans for easing monetary policy. The British pound ended lower, but it might find some support from a hawkish statement by BoE's Catherine Mann. She indicated that cutting rates by a percentage point over the next year could flare up inflation.

Asia Pacific: The USD/JPY pair fell 0.6% to 154.54 with the yen, driven by market reactions to Ukraine-Russia new developments and higher expectations of a BoJ rate hike in December, with markets pricing in more than 60% chance of BoJ hike, compared to last week's 53% chance. It was prompted by BoJ Governor Kazuo Ueda's speech yesterday where he gave an indication that next meeting outcome is still uncertain. The onshore Chinese yuan firmed for the first time in five days as the PBoC set the mid-daily fixing at 7.1934 per dollar, compared with 7.2473 market expectations.

Malaysia: Ringgit firmed slightly by 0.1% to close at 4.467, grinding away from the more than two months low it reached last week. This is despite the weaker overall emerging currencies through the falling of MSCI EM Currency index by 0.1%. We will be monitoring Malaysia's October inflation rate today where the market consensus is looking at 1.8% y/y print, unchanged from the prior reading.

Other Markets

Gold: Gold prices rose for the fourth consecutive day, trading above USD2,660/oz, as escalating tensions from Russia's war with Ukraine increased demand for the safe-haven asset.

Oil: Oil prices rose with Brent and WTI both climbing 2.0% driven by escalating Russia-Ukraine conflict and signs of improving demand.

Palm Oil: Price was steady at MYR5,025 per tonne yesterday. There was data indicating Indonesia's palm oil exports fell to 1.86 million tonnes in September from 2.384 million tonnes in August. Prices are down from October highs on signs of weakening demand as well as recent declines in soybean oil prices.

Source: AmInvest Research - 22 Nov 2024