MALAYSIA: Country Wrap: PMIs Down Again
- Malaysia's April PMI fell into contraction also, marking its lowest reading since late 2024 and the dubious honor of eleven straight months of contracting. April saw a decline to +48.6 from +48.8 in March. Output declined further to +47.4 from +48.4 whilst new orders rose relative to the prior month. (source MNI Market News)
- There are limited expectations for an interest rate cut in Malaysia as the Central Bank - Bank Negara - meets next week on May 8th. At present the survey of economists on Bloomberg has 13 respondents with only two forecasting a cut. It is true that data is showing signs of weakness with first quarter GDP softer than expected at 4.4% (expectations 4.8%) and today's PMI of 48.6 providing eleven straight months of contraction. Malaysia also is not immune to the trade war yet seems quite comfortable with their position. BNM (Bank Negara Malaysia) Governor Rasheed stated that monetary policy cannot solve trade wars and that the bank's focus remains on achieving price stability to support sustainable economic growth. The BNM does not state a formal inflation target. Given the last 2 years has seen CPI YoY in a 1.4-2.0 range, it would appear that the BNM are achieving their goal. Malaysia’s bond market seemingly agrees with just 8bps of cuts priced in over the next three months. There appears no apparent need to cut at this juncture and we see the likely scenario as yet another hold of rates at 3.00% where it has been since mid-2023. (source MNI Market News)
- As Malaysia prepares for a rate decision next week, weaker PMIs weighed heavy on the FTSE Bursa Malay KLCI which was one of the few markets to fall. Down -0.15% for the day, it remains over +1.5% higher for the week.
- The ringgit has had a strong week gaining +1.8%
- Bonds rallied hard today with the MGS 10YR down 5bps to 3.60%
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EURGBP TECHS: Trading Above Support
- RES 4: 0.8494 High Aug 26 ‘24
- RES 3: 0.8474 High Jan 20 and a key resistance
- RES 2: 0.8428/8450 High Mar 18 / 11 and the bull trigger
- RES 1: 0.8395 High Mar 24 and a key near-term resistance
- PRICE: 0.8355 @ 06:32 BST Apr 2
- SUP 1: 0.8316 Low Mar 28 and a key near-term support
- SUP 2: 0.8291 76.4% retracement of the Mar 3 - 11 bull leg
- SUP 3: 0.8251 Low Mar 4
- SUP 4: 0.8241 Low Mar 3 and a bear trigger
EURGBP is trading above last week’s low. The bear leg that started Mar 11 appears corrective and has allowed an overbought condition to unwind. MA studies are in a bull-mode position, highlighting a dominant uptrend. Support to watch is 0.8316, the Mar 28 low. A break of this level would signal scope for a deeper retracement and open 0.8290, a Fibonacci retracement. For bulls, clearance of 0.8395, the Mar 24 high, would be a bullish development.
SCHATZ TECHS: (M5) Sights Are On Key Resistance
- RES 4: 107.289 1.236 retracement proj of the Mar 4 - 6 bear leg
- RES 3: 107.200 Round number resistance
- RES 2: 107.120 High Mar 4 and key resistance
- RES 1: 107.090 High Mar 31
- PRICE: 106.970 @ 06:03 BST Apr 2
- SUP 1: 106.900 Low Mar 31
- SUP 2: 106.816 20-day EMA
- SUP 3: 106.715 Low Mar 25
- SUP 4: 106.630 Low Mar 18
Schatz futures maintain a firmer tone despite the pullback from Monday’s high. Price has cleared all the relevant retracement levels of the bear leg between Mar 4 - 6, and this signals scope for a climb towards key resistance and a bull trigger at 107.120, the Mar 4 high. On the downside, initial firm support to watch lies 106.816, the 20-day EMA. A move down and a breach of this level would signal a possible reversal.
GERMANY: Bankers Pessimistic About Growth Outlook
The Association of German Banks is painting a subdued picture for Germany’s economy. Quarterly growth has alternated between positive and negative outcomes since Q4 2022 leaving Q4 2024 down 0.2% y/y and the group is forecasting it to recover to only 0.2% in 2025 revised down from 0.7%, according to projections seen by Reuters. It expects it to improve to 1.4% in 2026 helped by fiscal stimulus.
- Heiner Herkenhoff, CEO of the Association of German Banks, said that “with strong reforms and the prospect of a competitive tax policy, the new government could stimulate investment earlier” than 2026, the earliest the new fiscal package will be felt, which includes increased defence and infrastructure spending.
- He expects real business investment to contract this year. "Even the expected increase of 3.5% for 2026 is rather weak compared to previous recoveries," Herkenhoff said.
- US 25% tariffs on imported autos is expected to weigh on Germany’s carmakers significantly and details on any further pain from reciprocal tariffs will be discovered later on Wednesday (4pm ET/9pm BST).
