Snapshot Summary

Global FX: The dollar rebounded, recovering from Friday's losses

Global Rates: US Treasury market started off the holiday-shortened week on weaker note

MYR Bonds: Ringgit government bond market saw muted trading flows

USD/MYR: The MYR gained further, in contrast with MSCI EM Currency movement

Macro News

UK: The final GDP report confirmed the UK economy stagnated in 3Q2024, covering the first three months of the new Labour government in the lead-up to its highly anticipated maiden budget at the end of October. This marks a downward revision from the preliminary estimate of 0.1% y/y growth and is lower than the revised 2Q2024 growth of 0.4%. The economy stalled amid prolonged elevated interest rates, weaker external demand, and concerns over budget policies, including tax rises and higher state borrowing. The services sector recorded no growth, while a 0.4% decline in production output offset a 0.7% increase in construction. The figures leaves the new government under pressure, with Chancellor Rachel Reeves acknowledging the huge challenge ahead to fix the economy.

Singapore: Singapore's November inflation data showed a deceleration in core CPI, which excludes accommodation and private transport costs, to a three-year low of 1.9% y/y, down from 2.1% in October. This has sparked speculation that the Monetary Authority of Singapore (MAS) may ease its monetary policy as early as January. The slowdown in core inflation was mainly driven by slower price growth in food and services. Meanwhile, overall inflation rose to 1.6% from 1.4%, as private transport costs declined at a more gradual pace.

Fixed Income

Global Bonds: The US Treasury market remained weak as we opened the holiday-shortened week, as sentiment remained affected by outlook for high inflation and slower pace of rate cuts in the coming year. Also on Monday, the UST market was cautious as the government held sale of the 2Y notes, worth USD69 billion. The sale is the first this week of a total of USD183 billion of UST papers. Nevertheless, the 2Y auction garnered a firm 3.73 times bid cover, and where foreign demand was strong reflected by indirect bidders ending up with 82.1% of the issuance.

MYR Government Bonds: The ringgit government bond market saw muted trading flows where benchmark MGS papers up to 10Y tenors generally saw less than MYR100 million volume each. Nevertheless, what little that were traded were on firmer footing which we think owed to UST yields finding resistance below the 4.60% level during the Asian session yesterday.

MYR Corporate Bonds: Trading interest in the PDS market was also muted which is not surprising ahead of the year end. Meanwhile, yields moved mixed yesterday amid realignment along select issuers. Notable trades yesterday include AAA rated Air Selangor 08/34 traded unchanged at 4.00% but Air Selangor 10/31 ended 2 bps higher at 4.05%.

Forex

US: The dollar rebounded, recovering from Friday's losses. Investor sentiment on the dollar improved after Congress passed spending legislation to avoid a government shutdown over the weekend, while strong capital goods orders signalled economic resilience despite a sharp drop in consumer confidence. Some suspected safe haven bid also drove the dollar after the President-elect Trump threatened to increase US control over Panama Canal, raising the global uncertainty.

Europe: The euro declined by 0.2% as ECB President Christine Lagarde indicated the eurozone inflation is nearing the central bank's medium-term target, reiterating that further rate cuts could follow. Meanwhile, the GBP fell 0.3% on the day.

Asia Pacific: The Japanese yen weakened as sentiment on the currency continues to be dictated by the BoJ's patience in raising interest rates, making the JPY vulnerable against the current dollar-seeking trend. The USDCNY pair caught a bid as the dollar surged higher for the fourth time in five sessions, despite a stronger-than-expected PBoC fix at 7.1870 vs. the average Bloomberg Survey estimate of 7.2901. The yuan may also be pressured by news suggesting Biden's team is probing tariffs on China's legacy chips, setting the stage for Trump to tackle supply chain risks and national security issues, potentially raising trade tensions further.

Malaysia: The MYR gained further following the lower-than-expected US PCE inflation and closed just below the 4.50-level. This is in contrast with the fall in MSCI EM Currency, which fell 0.1%. The ringgit retained its crown with 2.3% positive spot returns, compared with other regional and major currencies.

Other Markets

Gold: Gold price declined 0.4% as the dollar strengthened, driven by traders evaluating US monetary policy outlook for 2025 and recent consumer confidence and inflation data.

Oil: Oil prices edged lower in light holiday trading, with WTI nearing USD70 and Brent below USD74, as a stronger dollar and Trump's geopolitical actions, threatening to seize the Panama Canal, influenced the market.

Source: AmInvest Research - 24 Dec 2024