Snapshot Summary

Global FX: Modest gains for USD ahead of US CPI

Global Rates: US Treasuries slightly weakened after the FOMC meeting

MYR Bonds: Local govvies in a narrow range on weakness in the UST market

USD/MYR: Ringgit stabilized after a few days of bearish run

Macro News

Germany: Germany's exports increased by 1.3% m/m in August 2024, reaching a three-month high of EUR 131.9 billion. This figure exceeded market expectations of a 1.0% decline and followed a 1.2% rise in the prior month. This marks the second consecutive month of growth in shipments, with sales to the EU rising by 0.8% m/m, including a 0.6% m/m increase to the Euro area and a 1.4% m/m increase to non-Euro area countries. Exports to third countries also saw a 1.9% m/m increase, driven by higher sales to the US (5.5%), China (1.9%), and the UK (5.7%), although exports to Russia fell by 9.5%.

New Zealand: The Reserve Bank of New Zealand (RBNZ) reduced its official cash rate (OCR) by 50 bps to 4.75% in October 2024. This decision represents the second consecutive cut and aligns with market predictions. New Zealand's annual inflation rate fell to 3.3% in Q2 2024, down from 4% in the previous quarter and below market expectations of 3.5%. This marks the lowest level of inflation since Q2 2021, bringing it back within the central bank's target range of 1-3%.

Fixed Income

Global Bonds: US Treasuries weakened slightly as the FOMC meeting minutes suggested the recent big rate cut, which was backed by most FOMC voters, would not be followed by more large cuts (i.e., 50 bps). Treasury auctions continued to be lacklustre; the 10Y auction registering 2.48x BTC.

MYR Government Bonds: Government bonds were in a narrow range on lack of interest ahead of the US inflation data this week, recent weakness in the UST market, and MYR holding weak after recent losses against the USD.

MYR Corporate Bonds: Ringgit corporate bonds were traded mixed amid the lack of interest, and flows were left mainly on higher grade AAA papers as well as on select AA names especially power and utilities issuers. Notable trades include mixed movement on AAA PLUS. PLUS 01/31 rose 5 bps to close at 3.83%, PLUS 01/37 shed 2 bps to 4.00% and PLUS 01/38 fell 2 bps to 4.02%.

Forex

US: The USD made modest gains, reacting to the release of the minutes from the Federal Reserve's September meeting where it showed policymakers were divided on the 50 bps cut but eventually were influenced by Fed Chair Jerome Powell. At the same time, markets awaited Thursday's release of September's CPI. The rise was in tandem with the gains on UST yields.

Europe: The euro extended its sell-off to a two-month low against the stronger greenback and was last down 0.4% to 1.094. The pound sterling was also down 0.3% to 1.307 amidst lack of data driven flow.

Asia Pacific: The dollar-yen pair rose 0.7% to 149.31, exceeding Monday's high to reach its highest level since mid-August. This is despite the data Reuters Tankan Index sentiment index for Japanese manufacturers showed improvements among firms regarding business conditions for October. The currency continues to being pressured since Japan's new Prime Minister Shigeru Ishiba, surprised markets with recent remarks that the nation is not ready for further rate hikes. Meanwhile, China's yuan weakened against the USD as investors anticipated additional stimulus measures from the world's second-largest economy and awaited U.S. inflation data set for release on Thursday. China's finance ministry announced a press conference scheduled for Saturday to discuss fiscal policy, fueling hopes for new stimulus. This followed a news conference by the National Development and Reform Commission, which had disappointed markets by providing no significant new details on economic support measures.

Malaysia: During Asia session, some emerging Asian currencies registered minor gains against relatively muted dollar. The ringgit also stabilized on the day after few days of bearish run. Last night Fed meeting minutes which showed divided Committee may pose muted reaction for the ringgit as investors have already priced in the Fed would not trim its key rate aggressively.

Other Markets

Gold: Gold prices declined for the sixth consecutive session on Wednesday, falling below USD2,608/oz, the lowest level in nearly three weeks. This drop was driven by a stronger USD as traders anticipated that the Fed might not lower interest rates as quickly as previously expected.

Oil: Crude oil closed lower for the second consecutive day with Brent falling 0.8% and WTI declined 0.4%, as concerns over weak demand and a significant rise in US oil inventories outweighed fears of a potential Israeli attack on Iran. According to the Energy Information Administration's weekly report, US oil inventories increased by 5.8 million barrels last week, far surpassing the two-million-barrel rise expected the markets.

Source: AmInvest Research - 10 Oct 2024