Snapshot Summary

Global FX: The dollar was supported by US retail sales data

Global Rates: US Treasuries found support around 4.40% ahead of FOMC

MYR Bonds: Ringgit government bonds saw muted activity yesterday as the end-year effect takes hold

USD/MYR: MYR remained on the back foot against the firm USD

Macro News

UK: The UK unemployment rate stayed unchanged at 4.3% in November, aligning with the market expectations. The additional details showed that the number of people claiming jobless benefits climbed to only 0.3k in November, as compared to a decrease of 10.9k in October, beating the expected 28.2k. However, wages continued to surge as the country's central bank is set to decide rates at the year's final monetary policy committee this week.

US: Retail Sales increased 3.8% y/y in November, the biggest annual rise since December last year, following an upwardly revised 2.9% gain in the previous month. This suggests continued resilience in consumer spending, indicating holiday shopping season is off to a strong start.

Singapore: The country's non-oil domestic exports (NODX) unexpectedly grew 3.4% y/y in November, beating expectations of 1.7% after declining by 4.7% in October. It marked the fastest pace in NODX since August, buoyed by a jump in electronic product exports which expanded faster during the month (November: 23.2% vs. October: 2.6%) Meanwhile, non-electronic product fell by 1.6% in November, a smaller decline compared to the 6.8% drop in the previous month. On a monthly basis, NODX surged to a double-digit growth of 14.7%, the first increase in four months, reversing the steepest decline in seven months of an upwardly revised 7.5% plunge in October.

Fixed Income

Global Bonds: US Treasuries found support overnight, after the yields surge of the past week. The 10Y UST was seen supported near the 4.40% level. That said, sentiment remained cautious as we approach the FOMC meeting. Markets expect the Fed to cut its policy rate by 25 bps this week, but expectations are also that rate cuts thereafter will be conducted at slower pace than previously expected, in view of inflationary risks.

MYR Government Bonds: Ringgit government bonds saw muted activity yesterday as the end-year effect takes hold. Yields were mainly unchanged with sentiment also guarded ahead of the FOMC meeting, though there were some small gains seen on the front of the curve.

MYR Corporate Bonds: Sideways trading continued in the corporate bond space yesterday with yield realignment seen on some higher-grade names. Of these we noted AAA rated Air Selangor tranches 10/28 up 1 bps to close at 3.90%, 10/31 up 4 bps to 4.03%, 07/37 up 12 bps to 4.15% but 10/36 fell 2 bps to close at 4.04%.

Forex

US: The dollar firmed across the board on Tuesday as stronger-than-expected US retail sales (+0.7% in November) underscored resilient consumer spending, while traders positioned for a likely 25bps Fed rate cut. But the dollar gains were relatively limited seeing that traders also noted that if we are to exclude gas/autos from the headline retail sales, the overall data may have rose by less than market expectations.

Europe: The euro slipped 0.2%, continuing its near 5% decline this year, while sterling edged higher after hotter-than-expected UK wage data bolstered bets ahead of the Bank of England's rate decision on Thursday.

Asia Pacific: The yen strengthened 0.4% as markets pushed back expectations of a BoJ rate hike to January, while Japan's economy minister reaffirmed collaboration on monetary policy. The dollar dipped against the yuan as concerns over China's economic slowdown supported China's government bonds, with traders eyeing the PBoC's loan prime rate decision for policy direction. The Aussie was pressured by weak domestic consumer confidence and expectations of larger budget deficits, compounded by China's economic struggles.

Malaysia: The ringgit continued to weaken and seen near 4.467 this morning amid a firm USD. The USD/MYR pair marked its seven straight day of a bullish run yesterday as global markets focus has shifted towards the Fed and what it would do next year rather than solely at this week's policy meeting.

Other Markets

Gold: Gold slipped for a fourth straight session as a steady dollar and stronger-than-expected US retail sales kept pressure on prices ahead of the Fed's widely anticipated 25 bps rate cut decision.

Oil: Both Brent and WTI fell, as weak Chinese demand and lingering economic concerns outweighed news of a record 4% budget deficit plan by China's authorities for the coming year, keeping oil prices rangebound despite OPEC+ cuts and rising non-OPEC output.

Palm Oil: Palm oil trading remained choppy with prices showing relatively unchanged levels. Sentiment remained cautious on data suggesting shipments from Malaysia fell by 10% in first half of December.

Source: AmInvest Research - 18 Dec 2024