Snapshot Summary

Global FX: The Dollar started the week on a weaker note after mixed PMI numbers

Global Rates: UST yields remained elevated ahead of auctions and employment data

MYR Bonds: Rise in UST yields continued to weaken local govvies

USD/MYR: The USD/MYR pair continued its rise to reach the highest since August 2024

Macro News

Eurozone: The HCOB Eurozone Composite PMI edged up to 49.6 in December from 48.3 in November and an earlier estimate of 49.5. Despite this slight increase, it remained in contraction.

UK: The S&P Global UK Services PMI was revised slightly down to 51.1 in December from a preliminary estimate of 51.4, and up from 50.8 in November. This marks the 14th consecutive month of service sector expansion, though growth was only marginally faster than the previous month.

US: The S&P Global US Composite PMI climbed to 55.4 in December, up from 54.9 in November, marking the fastest growth since April 2022. Although this was below preliminary estimates of 56.6, the increase was primarily driven by strong expansion in the service sector, with a PMI of 56.8, which helped offset ongoing contraction in the manufacturing sector, where the PMI stood at 49.4.

New orders for manufactured goods in the US declined by 0.4% m/m in November compared to the previous month, reaching USD586.1 billion. This was slightly above market expectations of a 0.3% decrease, following a 0.5% increase in October.

Fixed Income

Global Bonds: US Treasury yields remained elevated, with the 10Y paper sustained above 4.60% after a mild rise overnight. Sentiment was cautious ahead of heavy new issuances and US employment data to be released in the coming week. However, speculation that Trump may consider less wide import tariffs aided sentiment and limited the climb in yields. Auctions this week include USD58 billion in 3Y notes, USD39 billion in 10Y notes, and USD22 billion in 30Y bonds.

MYR Government Bonds: Onshore government bond market weakened on 10Y and shorter tenor papers, after prior day's rise in UST yields and ahead of the 7Y MGS auction worth MYR5.0 billion this week. WI was heard yesterday at 3.808%. Meanwhile, the current 7Y benchmark was last dealt at 3.78%, up 1 bps.

MYR Corporate Bonds: There were more active flows in the corporate bond market yesterday with demand seen on selected papers. Notable trades include non-rated Maxis Broadband 08/32 which fell 16 bps to 4.63% and AA- rated UEM Sunrise 10/25 which fell 1 bps to 3.76%.

Forex

US: The DXY index began the week on a softer footing following mixed economic data, as the Composite and Services PMIs were revised down from 56.6 and 58.5 to 55.4 and 56.8 respectively, while factory orders fell 0.4% m/m vs. forecasts of a 0.3% drop. Meanwhile, reports surfaced that President-elect Donald Trump might shift from a sweeping universal tariff on all imports to a narrower plan targeting critical sectors-potentially to address inflation and political concerns-only for Trump to deny such plans shortly thereafter. This back-and-forth underscore the elevated policy uncertainty likely to amplify market volatility this year.

Europe: The euro rebounded from recent lows after German inflation surprised to the upside and France's and Germany's composite PMIs were both revised higher, pointing to improved economic prospects for the region. Similarly, the GBP strengthened 0.8% against a choppy USD.

Asia Pacific: The yen weakened following a downward revision to Japan's Services PMI but retraced some losses after BoJ Governor Kazuo Ueda indicated possible rate hikes if the economy continues to improve. Prime Minister Shigeru Ishiba's pledge to raise wages - which the BoJ deems critical for policy normalization - also provided support. The onshore yuan, meanwhile, hovered near a one-year low against the softer dollar, as the Caixin China General Services PMI climbed to 52.2 - its fastest expansion since May - on the back of stronger new business inflows.

Malaysia: The USD/MYR pair continued to grind higher, reaching its strongest level since August of last year, with trading activity remaining cautious ahead of this week's US labour market data and amid ongoing policy uncertainty stateside.

Other Markets

Gold: Gold declined for a second straight session though the dollar index trimmed losses after President-elect Trump refuted reports of a watered-down tariff proposal.

Oil: Oil futures snapped a five-day winning streak after initially benefiting from a weaker dollar, cold weather in the US, and Saudi Arabia's raised official selling price for February.

Source: AmInvest Research - 7 Jan 2025