Snapshot Summary

Global FX: The dollar fell on news that hedge fund manager Scott Bessent being nominated to the Treasury Department

Global Rates: Yields fell on news of the Bessent nomination, though overnight, Trump indicated his plans for additional tariffs

MYR Bonds: The MGS market was supported as UST yields fell

USD/MYR: Ringgit firmed to its two-week high whilst palm oil price rebounded

Macro News

China: PBoC maintained its 1Y medium-term lending facility (MLF) rate at 2.0% after cutting it back in September. This indicates policymakers are a tad more patient before releasing more monetary stimulus to aid China's economy. The central bank injected CNY900 billion into financial institutions via the 1Y MLF in November at a steady rate of 2.0%. This followed the maturity of CNY1.45 trillion in MLF loans this month, resulting in a net withdrawal of CNY550 billion.

New Zealand: Retail sales in New Zealand dipped by 0.1% q/q in 3Q2024 after a more significant 1.2% decline in the previous quarter. The RBNZ is due to decide on its official cash rate tomorrow, with Bloomberg consensus pointing to a 50 bps cut to 4.25%.

Germany: The Ifo Business Climate indicator for Germany fell to 85.7 in November from 86.5 in October, below the forecast of 86. This decline was influenced by the government's fall and the threat of trade tariffs from the upcoming Trump administration.

US: President-elect Trump indicated he will impose additional tariffs, comprising another 10% on Chinese goods and 25% on imports from Mexico and Canada. Meanwhile, Trump's nominee for the Treasury Department, hedge fund manager Scott Bessent, told the WSJ that a priority is Trump's tax cut plans, as will the plans for tariffs once he takes office. However, Bessent provided no details on the plans.

Fixed Income

Global Bonds: US Treasuries yields fell Monday as hedge fund manager Scott Bessent was nominated as Treasury secretary. Bessent has before expressed support for Trump's tariffs and tax cut plans. However, markets expect Bessent to focus more on economic and market stability. Players now look toward the release of the FOMC meeting minutes and PCE inflation data released this week. However, markets are opening this morning cautiously after news broke that Trump indicated he will impose additional tariffs, comprising another 10% on Chinese goods and 25% on imports of goods from Mexico and Canada.

MYR Government Bonds: The Malaysian government bond market was supported early yesterday, seeing UST yields down by about 5 bps on the back of the nomination of Scott Bessent as US Treasury secretary. However, gains were capped by late profit-taking activity.

MYR Corporate Bonds: Mixed movement continued in the ringgit PDS market yesterday, lacking support, with the MGS markets giving up early gains. Notable trades include AAA-rated PLUS 01/38, up 7 bps to 4.08%, though PLUS 01/36 was unchanged at 4.03%. AA1 rated Sabah Credit 07/29 fell 1 bps to 3.98%.

Forex

United States: The DXY fell on Monday, started the week in red and to go along with the UST yields, as market sentiment shifted due to the nomination of Scott Bessent as Treasury secretary, as markets expect the nomination would provide market stability rather than disruptive changes. Upcoming key data this week would be the Fed-preferred PCE Price index data and 2nd estimated GDP for 3Q2024, ahead of Thursday's Thanksgiving holiday.

Europe: Both the EUR and GBP gained amidst the weaker dollar. The former received some support from a cautious tone from ECB Joachim Nagel, emphasising the need for gradual ECB rate cuts to address inflation risks despite Germany's prolonged economic weakness. This is a similar tone ECB Chief Economist Philip Lane had during his speech last night.

Asia Pacific: The Japanese yen strengthened slightly. Japan's leading and coincident index showed better readings in September than in prior months. In China, the PBoC set the yuan fixing at 7.1918 vs. the market estimate of 7.2257. The onshore yuan closed firm at 7.246. We also noted some support for the currency after the PBoC maintained its 1Y medium-term lending facility (MLF) rate at 2.0%.

Malaysia: The ringgit strengthened 0.4% to finish Monday near its two-week high amidst a steady trading range.

Other Markets

Gold: Gold tumbled on signs of an ease in the Middle East crisis as news reports suggest a cease-fire agreement between Israel and Hezbollah.

Oil: Oil prices also fell on news of the potential cease-fire.

Palm Oil: Price rose by about 0/4% to MYR4,890 per tonne yesterday. The price rebounded after last week's decline from above MYR5,000 per tonne. Yesterday's rise was due to fears of a seasonal decline in Malaysian output. Last week's decline, by about 9%, was due to concerns about lower demand as Malaysia's exports reportedly fell more than 5% in the first 20 days of this month.

Source: AmInvest Research - 26 Nov 2024