Snapshot Summary

Global FX: Dollar index rose on demand ahead of US inflation data

Global Rates: Bond markets were jittery as traders awaited more data but aided by China's pledge to monetary easing

MYR Bonds: Continued profit-taking activity seen in the onshore bond market

USD/MYR: MYR snaps gains but was in a tight range

Macro News

Japan: Japan's GDP grew by 0.3% q/q in 3Q2024, surpassing initial estimates and market expectations of 0.2%. This follows a downwardly revised 0.5% increase in 2Q2024, marking the second consecutive quarter of growth.

China: China's annual inflation rate unexpectedly dropped to 0.2% in November, down from 0.3% in the previous month and below the forecast of 0.5%, marking the lowest level since June. This decline underscored increasing deflation risks despite recent stimulus measures from Beijing and supportive monetary policies from the central bank.

China's PPI fell by 2.5% y/y, a smaller decline than the 2.9% drop in the previous month and below the expected 2.8% fall. This marks the 26th consecutive month of producer deflation, though it is the mildest decrease since August.

Malaysia: Malaysia's unemployment rate stood at 3.2% in October, down from 3.4% in the same month of the previous year, marking the lowest level since January 2020.

Fixed Income

Global Bonds: Modest profit-taking activity was noted in the US Treasuries market on Monday as players waited for the US consumer inflation data. We think a high m/m rise in the data, above the 0.3% expectations, places doubt on the possible Fed rate cut at the FOMC next week. UST prices were also affected lower by risk appetite as China pledged loose monetary in the coming year, but losses were pared by safe-haven demand amid the geopolitical risks emanating from Syria.

MYR Government Bonds: After recent gains, government bonds closed weaker yesterday on hints of profit-taking activity. The 10Y UST finding a bottom at 4.14% during the Asian session yesterday also led to the MGS lacking in support, in our opinion. Weakness was seen on the 10Y MGS, which rose 2 bps to 3.79% in MYR240 million volume. The benchmark 10Y paper was in demand last week amid its small MYR2 billion issuance size this month.

MYR Corporate Bonds: Ringgit corporate bonds continued their sideways trading, and yesterday, we noted more yield realignment on various issuers. Notable trades include AAA-rated PLUS, where its 01/36 tranche fell 3 bps to close at 4.00%, while the 01/35 tranche fell 1 bps to 3.99%, and the slightly longer tenor 01/37 tranche rose 1 bps to 4.01%. Other names that are realigned include AAA-rated CIMB IMTN and AAA-rated Tenaga Power Gen.

Forex

United States: As traders await US inflation data, some safe-haven bids supported the dollar over the escalated geopolitical tension in the Middle East over the weekend, pushing the dollar index to close 0.1% higher.

Europe: The euro held steady against the dollar as traders awaited US inflation data and an ECB policy meeting, where rate cuts are expected. On the political front, France's President Macron plans to meet political parties to discuss government formation. The British pound went up slightly, and it started the week on a good note.

Asia Pacific: Some positive sentiments for the Chinese yuan came in after China's Politburo announced plans for an "appropriately loose" monetary policy and more proactive fiscal measures next year to support growth. The statement also mentioned focusing on stabilising housing and the stock market without dishing out exact details. However, markets could turn cautiously optimistic after the announcement of previous stimulus packages fell short of expectations. The AUD and NZD gained following the good news in China. On another note, the RBA's policymakers will meet today for the last time this year to set the key interest rate and the tone going into 2025. Markets expect the RBA to sustain its hawkish tone and maintain a cash rate of 4.35% this time. The Japanese yen fell despite the final 3Q2024 GDP data, which grew by 0.3% q/q and was revised upwardly compared to flash data of 0.2%.

Malaysia: The ringgit snapped its three straight days of bullish run and eased on Monday amidst a tight trading range. We may see cautious trade persist just ahead of key US inflation data. Yesterday, Malaysia's unemployment rate was stable at 3.2% for three consecutive months.

Other Markets

Gold: Gold surged to its highest since 22 November, driven by safe-haven buying amid geopolitical risks from the sudden collapse of local government and expectations of a US interest rate cut.

Oil: Crude oil went up, with Brent rising by 1.4% and WTI climbing by 1.7% amidst escalated Middle-East tensionds.

Source: AmInvest Research - 10 Dec 2024