THE US greenback depreciated by 0.49% to 97.60 as a consequence
THE US greenback depreciated by 0.49% to 97.60 as a consequence of resurgent coronavirus infections within the US, and the prospect of enhancing development overseas, souring traders’ attraction on the greenback.
However, the important thing financial launch this week contains: (1) ISM non-manufacturing PMI accelerating to 57.1 in June from 45.Four in Might (consensus: 50.1) – the best since February earlier than the coronavirus disaster; (2) July IBD/TIPP Financial Optimism easing to 44 from 47 in June; and (3) preliminary jobless claims decrease at 1.Four million as of July Four from 1.5 million within the week prior.
Brent crude value shaved off 1.05% to US$42.35 per barrel following: (1) the shock oil inventories build-up at 5.7 million barrels for the week ending July Three from provide cuts of seven.2 million within the earlier week (consensus: -3.1 million); (2) the resurgence of Covid-19 circumstances; and (3) issues over a number of US states re-imposing coronavirus lockdowns which outweighed indicators of a restoration.
The euro appreciated by 0.33% to 1.13 largely underpinned by a weaker greenback. Nevertheless, beneficial properties have been capped because of the bearish European Fee (EC) Summer time 2020 Financial forecast. The EC additional downgraded the EU financial system to a contraction of 8.3% in 2020, in comparison with 7.4% beforehand earlier than increasing round 5.8% in 2021.
The pound surged by 0.99% to 1.26 after British Finance Minister Rishi Sunak unveiled a restoration plan, pledging £30bil (US$37.7bil) to move off an unemployment disaster by paying firms to convey again furloughed staff and slicing taxes for hospitality companies and homebuyers.
The Japanese yen rose 0.29% to 107.2 supported by: (1) the higher June’s Eco Watchers Survey Present at 38.Eight from 15.5 in Might; and (2) equipment orders in Might that rebounded 1.7% month-on-month (m-o-m) from -12% m-o-m in April (consensus: -5.4% m/m).
Nearly all of Asia ex-Japan (AxJ) currencies climbed in opposition to the greenback. The offshore yuan topped the checklist, rising 1.02% to six.994 supported by the federal government’s optimistic financial outlook, adopted by the Indonesian rupiah that picked up 0.88% to 14,395. In distinction, the Indian rupee weakened 0.47% to 74.995 on the again of upper bids for the Reserve Financial institution of India to slash 50 foundation factors (bps) by fourth quarter 2020, dragged by the falling inflation.
Within the native area, the ringgit edged up 0.58% to 4.263 following each industrial manufacturing and distributive gross sales enhancing barely, albeit nonetheless falling by double digits for the second straight month in Might at -22.1% year-on-year (y-o-y) and -23.8% y-o-y from -32% y-o-y and -37.1% y-o-y, respectively in April.
US Treasuries (UST) Market
THE US Treasury curve bull flattened, seeing the longer tenures (10Y to 30Y) falling quicker at 6.2bps–12.6bps whereas the short-term papers eased 0.6bps–1.9bps.
Danger-off sentiment was supported by: (1) issues on the rising coronavirus circumstances within the US and a few components of the EU; and (2) Fed officers’ remarks that foresee the present scenario as a menace to the financial restoration.
Auctions for this week witnessed the 3- and 10-year observe yields awarded at 0.190% and 0.653%, respectively with bid-to-cover (BTC) ratios at 2.44 and a couple of.62 instances. As at midday yesterday, the 2-, 5-, 10- and 30-year benchmark UST yields stood at 0.14%, 0.27%, 0.59% and 1.28%, respectively.
Malaysian Bond Market
RAPID bond shopping for was seen throughout the Malaysian Authorities Securities (MGS) and Authorities Funding Difficulty (GII) segments, easing round 17bps and 19.6bps, respectively. Intense demand got here after Financial institution Negara’s Financial Coverage Committee (MPC) assembly by which the central financial institution delivered one other 25bps charge reduce as anticipated.
The OPR now stands at 1.75% – the bottom for the reason that charge was launched in 2004. Remarks from the MPC assembly have been deemed dovish with Financial institution Negara leaving the door open for additional charge cuts and remained information dependent.
Moreover, the reissuance of the 3Y MGS maturing on March 2023 garnered an exceptionally robust BTC of two.512 instances on the again of a complete dimension of RM5bil with no personal placement.
The public sale closed with a excessive/low of two.010% and 1.987% whereas averaging at 2.002%. As at midday yesterday, the 3-, 5-, 7-, 10-, 15-, 20- and 30-year benchmark MGS yields settled at 2.01%, 2.18%, 2.42%, 2.64%, 3.16%, 3.41% and three.79%, respectively.
Actions within the govvies phase declined 4% week-on-week (w-o-w) to RM29.5bil from final week’s RM30.8bil. The MGS phase rose 2% w-o-w to RM17.1bil from RM16.7bil within the earlier week. In distinction, the GII shrank 6% to RM10.7bil from RM11.3bil. In the meantime, buying and selling on the short-term payments (MTB/MITB) was decreased by 35% w-o-w to RM1.7bil from RM2.7bil.
Within the GG/AAA phase, DanaInfra Nasional Bhd 2022–2038 tranches dominated the checklist with a complete of RM810mil, buying and selling between 2.33% and three.62%. In the meantime, within the AA phase, some curiosity was seen in YTL Corp Bhd
2023–2026 medium-term notes which gathered RM140mil at 3.27%–3.15%.
Ringgit Curiosity Price Swap (IRS) Market
THE IRS was seen falling round 15–25.5bps throughout the curve. The three-month Klibor eased 25bps to 2.03%. Elsewhere, the 5-year credit score default swap slid 0.4% w-o-w to 66.45bps.
Malaysian Fairness Market
DURING the week (July 3–9), the FBM KLCI climbed 46.97 factors (pts) or 3.06% to 1583.25 pts, consistent with the rally within the MSCI Rising Markets Index that surged 5.47%, whereas the Dow Jones Industrial Common eased 0.47%. Buyers could also be reacting to the worsening Covid-19 pandemic within the US whereas different components of the world have been already nicely underway on the restoration path.
The US markets have been caught in a tug-of-war between upbeat financial information (resembling June 2020 non-farm payrolls) and rising Covid-19 circumstances, particularly in California and Florida, that will result in one other spherical of lockdowns.
Nonetheless, overseas traders remained internet sellers within the native market. For the week, overseas traders bought a complete of RM200mil value of Malaysian equities, bringing the year-to-date (YTD) internet outflow to RM16.7bil.
The overseas promoting was nicely absorbed by native institutional and retail traders, with a participation charge in July of 48.4% (versus 47.8% in June) and 38% (versus 37% in June) respectively. As overseas traders stayed passive, their participation charge in July fell to 13.6% (versus 15.2% in June).
In the meantime, overseas traders piled into MGS with a internet influx of RM7.8bil in June 2020, up considerably from a internet influx of RM1.9bil in Might 2020. Nevertheless, YTD, overseas traders remained internet sellers of MGS with a complete internet outflow of RM7bil.
Buying and selling actions eased barely with common every day worth traded sliding to RM4.3bil in July (versus RM4.6bil in June) whereas turnover velocity slowed all the way down to 59.5% in July (versus 70.9% in June).
Over the week, 11 out of 13 sectors in Bursa Malaysia ended within the constructive territory.
The highest performing sector was healthcare (+17.9%) pushed by robust prospects of producers of non-public protecting gear, together with gloves, on the worsening pandemic scenario within the US.
The worst performing sector was building (-0.6%) as gamers struggled to ramp up building actions below a brand new working atmosphere mandating numerous normal working procedures and social distancing.
Within the coming week, traders will preserve a detailed eye on:
US Client Value Index (June) on July 14;
> Financial institution of Japan’s rate of interest resolution on July 15;
> China’s gross home product (second quarter) on July 16;
> European Central Financial institution’s rate of interest resolution on July 16; and
> US core retail gross sales (June) on July 16.
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