Snapshot Summary

Global FX: Dollar strengthened on PPI data and widening cross-currency rate differentials with other central banks

Global Rates: UST yields inched higher on better-than-expected US PPI data

MYR Bonds: Local govvies saw profit-taking activity as players reassessed their positions ahead of year-end

USD/MYR: Ringgit continued its bearish trend in tandem with muted regional currencies

Macro News

Australia: Australia's seasonally adjusted unemployment rate dropped to 3.9% in November, down from 4.1% in the previous three months, defying market expectations of 4.2%. This marks the lowest jobless rate since March. The number of unemployed individuals decreased by 27,000, reaching an eight-month low of 595,300.

Eurozone: The European Central Bank (ECB) decided to reduce its key interest rates by 25 bps in December, marking the fourth rate cut this year, as anticipated. This decision is based on a shifted focus from inflation to growth-related concerns.

US: US PPI increased by 0.4% m/m in November, higher than the revised 0.3% rise in October and double the market forecast of 0.2%. This marked the largest monthly gain in five months. On an annual basis, producer price inflation rose for the second consecutive month to 3% from a revised 2.6%.

US initial jobless claims surged by 17,000 to 242,000, significantly exceeding market expectations of 220,000 and marking the highest level since October.

Fixed Income

Global Bonds: US Treasury yields rose on Thursday based on economic data. Notably, yields rose as the US producer price measure came in higher than expected, and food prices led to gains. On the other hand, initial jobless claims rose by 17k to 242k in the week ended 7 December. The Treasury Department sold USD22 billion in 30Y bonds at a high yield of 4.535%, or 1 bps above WI levels at 2.39 times BTC, the lowest ratio since September. Meanwhile, Bund yields were relatively stable as the ECB cut rates in an already widely expected move.

MYR Government Bonds: More profit-taking was seen in the local government bond space, and we think we owed to players reassessing their positions ahead of the year's end. Meanwhile, the market was cautious about coming ahead with the US PPI release after trading hours.

MYR Corporate Bonds: Mixed trading interest continued in the corporate bonds space, affected partly by the cautious sentiment in the govvies segment. Leading the flows include AAA-rated TNB Power Gen 06/42, which fell 1 bps to close at 4.07%, and select banking papers such as Agrobank 11/28 (AAA), which rose 9 bps to 3.85%.

Forex

United States: The US dollar strengthened Thursday following a hotter-than-expected producer inflation report and recent rate cuts by other central banks (BoC, SNB, and ECB), widening cross-currency rate differentials. But markets are almost fully pricing in a 25 bps cut by the Fed next week on rising jobless claims.

Europe: The ECB delivered a 25 bps cut and left the door open for more easing as the economy stays sluggish alongside noises in the political space, pushing EUR/USD down 0.3%. Meanwhile, the CHF slipped after the SNB surprised markets with a larger-than-expected 50 bps cut.

Asia Pacific: USD/JPY edged higher, hovering around its highest level in two weeks, as expectations for a December BOJ rate hike faded, though markets now anticipate a move in January, limiting aggressive dollar buying against the yen. The yuan faced renewed selling pressure, erasing early week gains as reports suggested China might tolerate further weakness to offset US trade tariffs. At the same time, record-low Chinese long-term yields and a 22-year-high yield gap with the US added to the downside.

Malaysia: Ringgit has continued to be on a bearish trend since Monday, partly erasing gains made last week amidst persistent cautious trade. This is also in tandem with muted regional currencies, in view that the weaker CNY sentiment could spill over to other Southeast Asian currencies as well.

Other Markets

Gold: Gold tumbled 1.4% after four days of gains as stronger-than-expected US PPI data pressured gold, with the dollar steady and Treasury yields lifted.

Oil: Brent and WTI went lower as the IEA trimmed 2024 demand growth forecasts and projected a 2025 supply surplus of 0.9 mbpd, citing rising output from non-OPEC+ producers despite delayed OPEC+ cuts.

Source: AmInvest Research - 13 Dec 2024