Snapshot Summary

Global FX: The dollar rose as traders reduced their expectations for a December Fed rate cut

Global Rates: US Treasury yields continued to trade within close distance of recent highs

MYR Bonds: Local govvies closed largely unchanged on lower UST yield during Asian session

USD/MYR: Ringgit among biggest regional losses as it went down 0.9%

Macro News

Eurozone: Eurozone's IPI fell by 2% m/m in September, marking the sharpest decline since January and surpassing market expectations of a 1.4% drop. Energy output decreased by 1.5% m/m, compared to a 0.3% rise in August.

US: US PPI rose by 0.2% m/m in October, following a revised 0.1% increase in September, aligning with market expectations. Service prices went up by 0.3% m/m compared to 0.2% in September. The core PPI increased by 0.3% m/m, above the 0.2% rise seen in the previous month.

US initial jobless claims fell by 4k from the previous week to 217k for the period ending November 9th, reaching the lowest level since May and well below market expectations of 223k. This data reinforces the perspective that the US labour market remains robust despite the prolonged period of elevated interest rates.

Fixed Income

Global Bonds: US Treasury yields continued to trade within close distance of recent highs but last night we saw yields on the shorter end of the curve went up while those at longer ends went down. Sentiment was guided by comments from Fed chief Jerome Powell who said there is no rush to cut rates amid a stable job market and sticky inflation. Some pressures were also seen after the US PPI showed a 0.2% rise in October and upward revision to 0.1% in September.

MYR Government Bonds: The Malaysian government bond market closed largely unchanged from the day before as players noted the UST yields backing down from high of 4.48% by about 2 bps lower during the Asian session yesterday. Malaysia awaits latest GDP data today. We foresee a slightly slower 3Q2024 GDP growth at 5.1% y/y, down from the advanced estimate of 5.3%.

MYR Corporate Bonds: Corporate bonds were traded weaker again yesterday as investors remained guided by weak global bond market sentiment. The heavier traded papers yesterday included KLK 09/34 (AA1) which rose 15 bps to close at 4.09% on MYR60 million volume. On the AAA segment we noted heavier flow on PASB 01/30 which rose 2 bps to 3.93% on MYR35 million volume. Along the GG segment, Danainfra 04/37 rose 14 bps to 4.04% on MYR70 million volume.

Forex

US: The dollar index and short-term Treasury yields rose as traders reduced their expectations for a December Federal Reserve rate cut following Chair Jerome Powell's comments about not rushing rate cuts. The likelihood of a December rate cut dropped to 58.9% from over 80% the previous day, while October's producer prices rose 0.2% and initial jobless claims were lower than expected, indicating a strong labour market.

Europe: The euro briefly dropped below $1.05 to a new one-year low before recovering some losses, ending the day down 0.3% due to expectations that the Fed will delay lowering its key interest rate. Meanwhile, the ECB is expected to further ease its policy in response to the region's growth challenges. The GBP also on back footing, ended the day down 0.3%.

Asia Pacific: Most of Asian currencies traded bearish again but the CNY firmed 0.1%. The onshore yuan strengthened for the second straight days. State-owned banks provided dollar liquidity in onshore market reported by news outlet. Additionally, the PBOC set the yuan reference rate at 7.1966, indicating continued support for the yuan with a wide spread of 359 pips against market estimate of 7.2325. The offshore yuan CNH declined for the fifth day. The Japanese yen closed near its intraday high of 156.42, which also the same level we last seen since July when the BoJ jolted the market by raising its interest rate.

Malaysia: The MYR was among the bigger losers in the region yesterday at -0.9%, just behind the THB of -1.2%. While Malaysia's GDP data will be released today where our in-house view projects for a slower 5.1% y/y growth, we posit that the ringgit's direction continue to be dictated by external factors. Last night Fed Chair Powell's statement may provide fresh set of pressure on the ringgit, thus we revise our support - resistance level to be 4.42 - 4.45 and 4.50 - 4.53, respectively.

Other Markets

Gold: Gold remained near a two-month low due to a strong dollar and reduced expectations for a December Federal Reserve rate cut, with bullion steady after five days of declines.

Oil: Oil prices rose with Brent climbing 0.4% to settle above USD72 per barrel while WTI settled at USD68 per barrel following US report showing gasoline stockpiles at a 10-year seasonal low after it dropped sharply by 4.4 million barrels, compared to 1 million barrels gains market expectations.

Source: AmInvest Research - 15 Nov 2024