Snapshot Summary

Global FX: The dollar fell upon release of weak US manufacturing PMI

Global Rates: US Treasury yields edged higher as we approach FOMC, BoE and BoJ meetings

MYR Bonds: Persistent profit-taking activity was seen in the ringgit govvies space yesterday whilst IRS rates also rose

USD/MYR: MYR on weak footing tandem with regional currencies

Macro News

China: China's retail sales disappointed in November when it rose just 3% y/y (October: 4.8%), below expectations of 4.6%, amid weakened sentiment in the real estate market - another sign that Beijing's current efforts to boost the economy are insufficient to revive sluggish demand. The previous month had recorded the quickest growth since February, aided by the annual Single's Day shopping which kicked off more than a week earlier than in 2023. While the country has rolled out multiple rounds of stimulus measures, the latest reading pointing out flagging consumer confidence for spending purpose.

Japan: The au Jibun Bank Japan Manufacturing PMI increased to 49.5 in December from 49 in the previous month, marking the highest reading since September. Despite that, the latest number showed the six consecutive month of contraction in factory activity as new orders continued to fall with foreign sales declining faster. On the pricing front, input cost inflation accelerated to a four-month high, whereas output cost inflation accelerated to its highest rate since July.

Australia: The Judo Bank Australia Manufacturing PMI dropped to 48.2 in December from 49.4 the previous month. New orders declined at the sharpest pace since October, and output also decreased. Manufacturers claimed that worsening market conditions affected operations in the goods-producing sector. However, they were optimistic about future activity, amid lower interest rates and enhanced business development efforts.

UK: The S&P Global Flash UK Manufacturing PMI fell to 47.3 in December 2024 from 48 in November, compared to forecasts of 48.2, preliminary estimates showed. The latest reading pointed to the biggest contraction in the manufacturing sector in 11 months, amid production declined for a second straight month and there was a steep and accelerated decrease in new orders.

Fixed Income

Global Bonds: On Monday, US Treasury yields edged higher in choppy trading as sentiment was guarded as we approach FOMC (plus BoE and BoJ meetings) this midweek. Even though markets expect the Fed to cut its policy rate by 25 bps this week, markets are cautious as Fed policymakers may now expect cut rates at a slower pace in view of inflationary risks. UST traders also kept note that Fed chairman Powell recently also acknowledged that the US economy now appears stronger than it did in September when the Fed started its current rate cut cycle.

MYR Government Bonds: Persistent profit-taking activity was seen in the ringgit govvies space yesterday whilst IRS rates also rose. Together with cautious sentiment before the FOMC meeting and continued sluggish MYR also meant the market was mostly weaker yesterday.

MYR Corporate Bonds: Sideways trading continued in the ringgit corporate bond market yesterday as sentiment remained affected by weak sentiment in global markets and as the govvies space remained subdued. Heavier volume trades yesterday include AAA rated Air Selangor 10/31 which was repriced 14 bps higher at 3.99% and AAA rated Sarawak Petchem 07/30 which was firmer by 4 bps and closing at 3.94%.

Forex

US: The dollar fell overnight, upon release of weak PMI data. The S&P Global US Manufacturing PMI was printed at 48.3 for the month of December vs 49.5 expectations and down from 49.7 the prior month. The weaker dollar was despite the services PMI released at higher 58.5 in December vs 55.8 consensus and 56.1 the month before.

Europe: EUR posted decent gains, taking advantage of choppy USD. The business PMI survey for Eurozone remained in the contraction zone but it saw improvements thanks to the services sector turned to growth from a decline in November. ECB President Lagarde commented that "darkest days" of high inflation are behind the eurozone, suggesting a clearer path toward lowering interest rates.

Asia Pacific: JPY was pressured with the USD/JPY pair up 0.3% yesterday. JPY boost remained largely absent for now ahead of BoJ policy meeting this week where policymakers are expected to hold the Target Rate at 0.25%. CNY remained weak and sentiment for it was not helped yesterday by weak data where retail sales disappointed in November when it rose just 3% y/y vs 5% consensus expectation. AUD and NZD were aided by broad USD weakness.

Malaysia: The ringgit started off the week on weak footing in tandem with other Asian currencies. Domestically, the focus this week will be on external trade data, though the market is looking at a marginal growth in Malaysia's exports for the month of November.

Other Markets

Gold: Gold steadied at after two bearish sessions, as a weaker dollar offered support following end-of-year profit-taking and pressure from rising UST yields that prompted last week's sharp selloff.

Oil: Crude oil fell as weak Chinese economic data, including disappointing retail sales and falling home prices, reinforced concerns over oil demand prospects from the world's largest importer, while broader uncertainty around US-China trade tensions further weighed on sentiment.

CPO: Palm oil trading was choppy; prices gyrated between daily gains and losses as traders mulled data that showed shipments from Malaysia fell by 10% in first half of December. However, palm oil was also supported yesterday by bargain hunting interest.

Source: AmInvest Research - 17 Dec 2024