Snapshot Summary

Global FX: USD steady despite lower US PPI data

Global Rates: 10Y UST yield higher despite the PPI numbers

MYR Bonds: Government bond trading interest remain lagging

USD/MYR: Ringgit remain guided by external drivers, ignoring downside to Malaysia's IP print

Macro News

US: Another key US inflation gauge fell in September when the PPI came in at 1.8% y/y, a slight downshift from an upward revised +1.9% the previous month. Meanwhile, PPI m/m was at zero vs 0.2% m/m in August as gasoline prices fell. The latest data seems to point that two more 25bps rate cuts to close out the year are still on the table.

UK: The UK economy returned to growth in August by 0.2% after two months of flatlining in June and July, based on the latest figures from the Office for National Statistics (ONS). The dominant services sector grew by 0.1% (July: 0.1%) following the interest rate cut early in the month. Meanwhile, manufacturing expanded by 0.5% (July: -0.7%) while construction output grew by 0.4% (July: 0.4%). The result comes ahead of Chancellor Rachel Reeve's first Budget, which is anticipated to be delivered on 30 October.

China: The inflation rate stood at 0.4% in September (August: 0.6%), the lowest since June, indicating that demand remained fragile. The country's policymakers have recently unveiled measures to stimulate economic activity and spur household consumption. Last weekend, China's finance minister paved the way for a support package to overcome the years-long property sector crisis and low consumption, which has plagued the economy.

Malaysia: Malaysia reported industrial production was at a lower +4.1% y/y in August, vs 5.5% consensus expectation and 5.3% y/y the month before. Manufacturing output grew by 6.5% y/y but lower than the prior month's 7.7% y/y. However, industrial production rebounded encouragingly by +1.7% m/m vs the 1.5% contraction the month before.

Fixed Income

Global Bonds: On Friday, the 10Y UST ended 4 bps higher despite September's producer-price report showed no change m/m. For the week, yields moved higher as traders continued to account for previous Friday's strong September jobs report, which revealed 254k new jobs added. The bond market will be closed on Monday in observance of Columbus Day.

MYR Government Bonds: Government bond trading interest remain lagging seeing the continued weakness in the UST market. Aside, the WI for GIl 11/34 reopening was heard within 3.80% to 3.81% range.

MYR Corporate Bonds: Trading of ringgit corporate bonds remained lacking, and we saw Friday only selected names being traded. However, notably we saw pickup on AAA PLUS tranches. PLUS 01/30 fell 17 bps to 3.79%, while PLUS 01/31 fell 2 bps to 3.82%.

Forex

US: On Friday, the US dollar remained steady against major currencies as the market absorbed economic data aligned with the Fed's ongoing monetary policy strategy. The US producer prices unchanged in September added to a series of indicators that suggest the Fed is on track to lower interest rates again in the coming months. Market expectations reflect this sentiment, with a nearly 91% likelihood of a 25 bps rate cut at the Fed's next meeting. In comparison, only 9% of traders anticipate rates will remain unchanged, according to the CME FedWatch tool.

Europe: The euro also was flat, and the pound was up slightly. The UK economy saw growth in August after two months of stagnation, offering some relief to Finance Minister Rachel Reeves as the new Labour government prepares to present its first budget later this month. Meanwhile, markets are keeping a close eye on French politics following the government's unveiling of its 2025 budget on Thursday. The plan includes EUR60 billion (USD65.5 billion) in spending cuts and tax increases on the wealthy and large corporations to address the country's rising fiscal deficit.

Asia Pacific: The yuan firmed against the dollar on Friday, though most traders remained cautious, staying on the sidelines ahead of a Ministry of Finance press conference set for Saturday morning, where more details on fiscal stimulus plans were expected to be unveiled. However, it fell short of market expectations as the official did not spell out precisely what fiscal support Beijing would deploy. On another note, China's economy still struggles with deflationary pressures following the CPI and PPI releases. Meanwhile, the yen consolidated within a narrow range.

Malaysia: The ringgit strengthened slightly in tandem with the upside among Asian currencies as bets continued for Fed rate cuts persist. Data-wise, Malaysia's industrial production and retail sales grew slower in August which are not supportive for the ringgit, and the currency's movement was dictated mainly from the external front.

Other Markets

Gold: Gold prices climbed early on Friday following the US PPI downside. Gold was last seen rising by 1.0%.

Oil: Crude prices dipped but still secured a second consecutive weekly gain, as traders balanced the potential impact from hurricane-related damage on US demand against the possibility of widespread supply disruptions due to the Middle East crisis.

Source: AmInvest Research - 14 Oct 2024