Snapshot Summary

Global FX: Sentiment remains favourable towards dollar buying as DXY rose on Friday

Global Rates: US Treasury yields fell due to some profit taking off the 'Trump trade'

MYR Bonds: Local govvies strengthened last Friday after US Fed 25 bps rate cut

USD/MYR: The ringgit neared the 4.40 level as it recouped the previous session's losses

Macro News

Malaysia: Malaysia's IPI increased by 2.3% y/y in September, slowing from a 4.1% growth in the previous month. This was the ninth month in a row of growth, though it was the slowest in this period. Manufacturing output rose more slowly, at 3.2% y/y compared to 6.5% in August, and electricity output also saw a modest increase of 3.9% y/y versus 4.1%.

Malaysia's unemployment rate dropped to 3.2% in September, down from 3.4% the same month the previous year. This marked the lowest rate since January 2020.

China: China's annual inflation rate was 0.3% in October, slightly lower than 0.4% in September and market expectations. This marked the ninth consecutive month of positive consumer inflation, the lowest rate since June, highlighting growing deflation risks despite Beijing's stimulus measures in late September.

US: United States Michigan Consumer sentiment increased to 73 in November, marking the highest in seven months compared to 70.5 in the previous month.

Fixed Income

Global Bonds: US Treasury yields fell last Friday. Some profit-taking off the 'Trump trade' amongst risk markets and US stocks backing down from their weekly highs ahead of Friday's closing sent bids towards the US government bond market. The midweek Fed rate supported sentiment for a bond cut, though the decision was widely expected. There remain firm expectations that the Fed will continue to cut with Fed funds futures trading are pricing in an 65% probability that the Fed will cut by another 25 bps in December. Meanwhile, Bund yields fell as traders picked up bonds amid last week's Fed and BoE rate cuts and safe-haven bids due to the Trump threat to global trade and the collapse of the German government.

MYR Government Bonds: The MGS market strengthened last Friday after the Fed 25 bps rate cut and part unwinding of the Trump trade. Gains were slanted on tenors up to 10 years, where yields fell 4-7 bps, but there were gains on longer tenors, where we saw the 20Y benchmark fall 2 bps and the 30Y MGS was down 1 bps.

MYR Corporate Bonds: Corporate bond trading remained lacklustre, though gains were seen in some AA names. Flows were heavier on very select papers. These include SPetchem 07/28 (AAA) which rose 5 bps to close 3.85% on MYR40 million volume, and RHB IMTN 10/25 (AA1), which fell 7 bps to 3.55% on MYR30 million volume.

Forex

US: The DXY rose on Friday as the University of Michigan's November consumer sentiment index hit a seven-month high, beating the market forecast. Despite the recent rate cut by the Fed on Thursday, the sentiment remains favourable towards buying a dollar following Trump's win the US election.

Europe: On top of dollar strength, the euro is struggling against Germany's political uncertainty, marked by the collapse of Chancellor Olaf Scholz's coalition government. At the same time, the GBP also fell 0.5% on the day, but the cautious tone of the BoE following Thursday's 25 bps partly supported the pound.

Asia Pacific: The JPY strengthened despite the firm dollar. On the data front, Japan's household spending fell by 1.1% y/y in September 2024, marking a continued decline as inflation outpaces wage growth, dampening consumer purchasing power. The CNY level weakened to near 7.20 after a new stimulus announced on Friday fell short of market expectations. China's top legislative body, the standing committee of the National People's Congress (NPC), approved bills enabling local governments to allocate 10 trillion yuan (USD1.4 trillion) to reduce off-balance sheet, or "hidden," debt.

Malaysia: The Malaysian ringgit was stable, shying away from the 4.40-level and recoup previous session's losses. Alongside the MYR support was the better IPI number and lower global bond yields, including MGS yields.

Other Markets

Gold: Gold dipped as the dollar strengthened and treasury yields were mixed. The level remained below the 30 October high of circa USD2,800 as traders took profits following Donald Trump's re-election.

Oil: Brent crude oil futures dropped as worries about extended supply disruptions from Hurricane Rafael in the US Gulf of Mexico eased, coupled with dissatisfaction regarding China's recent economic stimulus actions.

Source: AmInvest Research - 11 Nov 2024