MALAYSIA: GDP Below Expectations Opening Door for the BNM in 2025.
Jan-17 04:09
- Malaysia fourth quarter GDP printed at +4.8%, below expectations of +5.2% and down from +5.3% in 3Q.
- Malaysia’s economy has remained robust in 2024, despite the currency experiencing a challenging environment in the last part of the year from a resurgent USD.
- Malaysia’s economy is supported by a robust services and manufacturing sector although manufacturing is showing signs of softening.
- Unexpectedly also, the agricultural sector contracted primarily driven by the volatility in the palm oil sector.
- Construction remains robust and it remains to be seen if the BNM now comes into play in the early part of the year as volatility is expected to increase.
- Markets gave a muted response to the data with the currency stable and bonds already higher in yields in the morning session.
- The BNM has flexibility to act should the economy soften but at this stage appears likely to be patient to see what impact the US government will have on trade in the region.
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JGBS: Little Changed, FOMC Tonight, BoJ Policy Decision Tomorrow
Dec-18 04:06
JGB futures are stronger, +10 compared to settlement levels.
- Outside of the previously outlined trade balance data, there hasn't been much by way of domestic drivers to flag.
- The focus remains on tomorrow’s BoJ policy decision, with the broad consensus expecting no change to policy settings.
- Towards late November, market pricing for the meeting outcome stood at over 60% in terms of a 25bps hike priced in. This has fallen back sharply though as we have gotten closer to the meeting date, last around 14% probability priced for a full rate hike.
- In terms of what has shifted sentiment around the likely meeting outcome, it has more reflected press articles, along with BoJ commentary, as opposed to shifts in data outcomes. (See MNI BoJ Preview here)
- Cash US tsys are ~1bp richer in today’s Asia-Pac session ahead of today's FOMC policy decision.
- Cash JGBs are slightly richer across benchmarks. The benchmark 10-year yield is 0.1bp lower at 1.083% versus the cycle high of 1.108%.
- The swaps curve has twist-steepened, pivoting at the 20-year, with rates 1bp lower to 3bps higher.
- Tomorrow, the local calendar will also see Weekly International Flow and Tokyo Condominiums For Sale data.
EQUITIES: S&P 500 Growth Stocks Continue To Outperform Value Stocks
Dec-18 03:56
- The S&P 500 Growth Index, up 40.50% y/y continues to outperform the Value Index, up 14.95% y/y. Growth has now outperformed by 25.5% over the past year, reaching the largest gap overnight.
- The S&P 500 has returned 26.85% for the year, while the NASDAQ is 30.76% for the year.
Chart. S&P 500 Growth vs Value
OIL: Crude Steady Ahead Of Fed Decision Later
Dec-18 03:51
Oil prices are little changed today ahead of the Fed decision and are holding onto this week’s losses driven by soft China data and weaker risk appetite. They have found some support from an earlier reported US inventory drawdown. WTI is up 0.1% to $70.13/bbl after a low of $70.05 and a high of $70.34. Brent is slightly higher at $73.23 following a peak of $73.43. The USD index is flat.
- With attention on the supply side, Bloomberg reported that there was a US crude inventory drawdown of 4.7 million barrels last week, larger than expected, according to people familiar with the API data. Product stocks continued to rise though with gasoline 2.4mn barrels higher and distillate +744k. The official EIA data is out later today.
- Sanctions are tightening on Russian crude exports with the EU adding over 50 ships to its blacklist and now the UK has announced measures aimed at key players in Russia’s oil industry and also its shadow fleet. The US is also looking to lower its price cap.
- The effect of the incoming Trump administration on oil prices remains unclear with increased US supply likely but also increased sanctions on Iran reducing its ability to export. The uncertainty is contributing to crude’s current range trading, according to Westpac.
- Later the Fed decision is announced and a 25bp rate cut is widely expected (see MNI Fed Preview). There are also US November housing starts/building permits and Q3 current account data, as well as UK November CPI/PPI. The ECB’s Lane speaks.
