Malaysia sees tremendous synergies between Asean and BRICS as the country takes the chairmanship of Asean next year, promoting inclusivity and sustainability, said Economy Minister Rafizi Ramli. 

He said Malaysia wants to showcase its regional leadership in semiconductors, the energy transition and Islamic finance. 

“Indeed, Malaysia’s application to BRICS is centred on building economic partnerships, strengthening trade ties and expanding our growth potential,” he said in the national statement by Malaysia at the BRICS Outreach/BRICS Plus Summit in Kazan, Russia, on Thursday. 

His speech was telecast live on his official X account on Thursday night. 

“Whether it is Asean or BRICS, there is a commonality in our worldview. As some parts of the world turn inwards, we remain steadfast and will continue to engage openly,” he said. 

He also pointed out that Malaysia is crafting a new position for the country to play as the Asean chairman in 2025. “One that is rooted in economic diplomacy where our centrality and neutrality bridges Asean and BRICS and where we become a focal point for countries that want to push back against the global trend,” he said. 

Rafizi also noted that Malaysia strongly calls for an immediate and permanent ceasefire and to allow unrestricted humanitarian access to Gaza. 

Besides that, he said Malaysia strongly condemns the attack on the United Nations Interim Force in the Lebanon headquarters which injured several peacekeepers.

“The countries of the Global South have continued to be marginalised, and remain under-represented, and the rise of protectionism cripples smaller countries from getting ahead,” he pointed out. 

Hence, he said barriers to development finance impede the building of vital infrastructure and a growing global debt has become a chokehold to growth.

For Malaysia, he said BRICS is not just a rejection of these constraints, but it is also the solution. 

“As the world becomes multipolar, BRICS has become a critical counterbalance. If member countries can embrace seamless economic linkages, the potential is exponential,” he stressed. 

Rafizi said that by promoting greater economic integration, developing countries will have more opportunities in infrastructure investment, technology transfer and capacity building.

Malaysia has been recognised as one of 13 nations officially added to BRICS as a partner country, a bloc that collectively accounts for one-fifth of global trade.

Apart from Malaysia, the other 12 nations are Algeria, Belarus, Bolivia, Cuba, Indonesia, Kazakhstan, Nigeria, Thailand, Türkiye, Uganda, Uzbekistan and Vietnam.

The bloc represents about 40% of the global population and accounts for a cumulative gross domestic product (GDP) of US$26.6 trillion (RM115.4 trillion), or 26.2% of the world’s GDP, nearly matching the economic strength of the Group of Seven.

Source: The edge markets

Last week, Phillips 66 said it would shut down its Los Angeles oil refinery by the end of next year. Now, refining peer Valero Energy Corp is suggesting it could be next.

Valero, the United States’ second-largest refiner by capacity, is keeping all options “on the table” for its two California refineries. According to the company’s Chief Executive Lane Riggs, this is due to the increasing regulatory pressure that has pervaded California.

Oil refiners in California saw lower-than-average margins in late spring/early summer this year as lower operating capacity failed to deliver higher margins. According to the EIA, this is because refiners increased their existing capacity utilization rates.

Despite the lower margins, California boasts the most expensive gasoline in the United States—a condition that the California Governor’s Office blames on refiners. In an attempt to hold refiners accountable, the Office has threatened to penalize them for price gouging.

California, however, has the highest excise duty on gasoline of all the states.

California legislators then adopted a law that allowed authorities to cap refiners’ profits whenever they see fit. Even more recently, California Governor Gavin Newsom signed a bill that would give state energy regulators the power to mandate fuel inventory levels for refiners and the ability to approve—or not—scheduled refinery maintenance.

“Price spikes at the pump are profit spikes for Big Oil,” Newsom said at the time. “Refiners should be required to plan ahead and backfill supplies to keep prices stable, instead of playing games to earn even more profits. By making refiners act responsibly and maintain a gas reserve, Californians would save money at the pump every year.”

Chevron previously cautioned that such action would spell trouble for California refiners and ultimately blowback on end consumers.

Valero operates refineries in Benicia and Wilmington, California.

Source: OILPRICE

New applications for US unemployment aid unexpectedly fell last week, but the number of people collecting benefits in mid-October was the highest in nearly three years, indicating it was becoming harder for those losing jobs to land new positions.

The second straight weekly drop in filings for state unemployment benefits reported by the Labor Department on Thursday likely reflected an ebb in claims from Hurricane Helene, which earlier this month had boosted applications to the highest level in nearly 1-1/2 years. There is a still a chance that claims could rise in the weeks ahead as the impact on the labour market from Hurricane Milton has yet to be felt.

Given the distortions from the hurricanes as well as an ongoing strike at Boeing, economists expected Federal Reserve officials to shrug off any decline in nonfarm payrolls or rise in the unemployment rate when they meet next month. The employment report for October will be published days before Americans head to the polls on Nov 5 to elect a new president.

"The labour market is softening but not imploding," said Carl Weinberg, chief economist at High Frequency Economics. "Fed policy is aimed at supporting the economy and the job market before a recession shapes up. Gradual easing to achieve that goal may achieve it."

Initial claims for state unemployment benefits dropped 15,000 to a seasonally adjusted 227,000 for the week ended Oct 19, the Labor Department said on Thursday. Economists polled by Reuters had forecast 242,000 claims for the latest week.

Unadjusted claims declined by 22,634 to 202,635 last week. A jump of 4,275 in filings in Florida was more than offset by significant decreases in Georgia, North Carolina, New York, Texas as well as Tennessee, Ohio and Michigan.

Though the hurricanes and the strike have obscured the labor market view, there does not appear to be a major material shift.

The Fed's "Beige Book" report on Wednesday described employment as having "increased slightly" in early October, "with more than half of the districts reporting slight or modest growth and the remaining districts reporting little or no change."

It also noted that "many districts reported low worker turnover, and layoffs reportedly remained limited" adding that "demand for workers eased somewhat, with hiring focused primarily on replacement rather than growth."

Boeing's unionised West Coast workers voted on Wednesday to reject a proposed new contract that included a 35% pay hike over four years and enhanced contributions to workers' 401(k) retirement plans.

Continuing claims rise

The number of people receiving benefits after an initial week of aid, a proxy for hiring, rose 28,000 to a seasonally adjusted 1.897 million during the week ending Oct 12, the highest level since mid-November in 2021, the claims report showed.

The so-called continuing claims covered the period during which the government surveyed households for October's unemployment rate. Continuing claims increased between the September and October survey weeks.

The jobless rate dropped to 4.1% in September from 4.2% in August. Its rise from 3.4% in April 2023 to 4.3% in July this year was the trigger for the US central bank's unusually large 50-basis-point rate cut last month.

The first reduction in borrowing costs since 2020 lowered the Fed's policy rate to the 4.75%-5.00% range. The Fed hiked rates by 525 basis points in 2022 and 2023 to curb inflation. It is expected to cut rates by 25 basis points next month.

Source: The edge markets

USD: Dollar rally may only be temporarily halted

The loss of momentum in the dollar rally we saw yesterday doesn’t seem to be the beginning of a broader trend. US yields were probably due an adjustment lower after the recent Treasury selloff, and that was mainly behind the slight dollar softening. Looking at both the US macro and political dynamics, the greenback can continue to find good support for the next few days.

Latest US data releases sent some contrasting signals on the jobs market, as jobless claims surprisingly fell while continuing claims rose. Remember that these figures are still being affected by the recent severe weather events and should probably be taken with a pinch of salt. On the activity side, high-frequency indicators have remained strong, and yesterday’s S&P Global composite PMI printed a surprise acceleration. The growth divergence with a struggling eurozone remains a key underlying dollar-positive theme and will hardly turn in the opposite direction anytime soon.

Today, the US calendar includes durable goods orders for September and a speech by FOMC’s Susan Collins. Fed officials have not given away much during the IMF week in Washington, suggesting they are – like the market – in a wait-and-see mode ahead of labour and inflation data that will determine whether to cut once or twice before year-end.

The lack of crucial developments on the macro side probably means a greater focus on election-related news. The latest batch of polls confirmed Donald Trump is slightly ahead in the swing states and has gained some momentum in surveys about his handling of the economy and general approval ratings. Kamala Harris held a large campaign event in Georgia, which, apart from Arizona, is the swing state where she is polling the worst (Trump leads by around 1.6 points). Looking at the latest polls aggregate, Harris has gained some traction in Wisconsin and Michigan. These two states combined give 25 electoral votes out of the 44 she needs to win the election, assuming no 'lock or lean' Democrat state flips.

The polls are clearly telling us the election is too close to call, but markets and betting odds are leaning increasingly in favour of Trump. This may be due to the experience of the past two elections, where Trump was underestimated by polls, but also by greater hedging demand for a Trump presidency, which is seen as a more impactful macro/market event due to protectionism, tax cuts, strict migration policies and risks to the Fed independence. As discussed in this note, we see both dollar upside risks and wider implied-historical volatility spread into Election Day.

EUR: ECB now in “gut feeling” phase

Bundesbank president Joachim Nagel was asked on two separate occasions during his stay in Washington whether he would consider a 50bp cut in December, and both times, he refrained from explicitly pushing back. This is a perfect case in point in the latest (substantial) shift in the ECB’s communication: Nagel is one of the most hawkish members of the Governing Council and would have probably answered with a clearer “no” only a month ago.

Our ECB watcher Carsten Brzeski explains here how the ECB has shifted from a data-based to a “gut feeling” approach, with much greater emphasis on growth sentiment. Yesterday’s PMIs weren’t as bad as expected in Germany but were below consensus in France and still in contraction territory for the eurozone as a whole. One aspect of this shift to a “gut feeling” approach is that the US election can now have a greater bearing on the ECB’s December decision. A Trump win and associated tariff risks could tilt the balance to a 50bp cut unless data firmly suggests otherwise.

Markets are probably applying similar reasoning to ECB pricing, and we think there is a bit of Trump risk now embedded into those 35bp of easing factored in by year-end. Surely, neither PMIs nor ECB speakers have done much to disincentivise dovish bets this week. Today, we will hear from General Council member Villeroy and take a look at the September inflation expectations figures published by the ECB.

EUR/USD is back above 1.0800, but we doubt there is much more room for a rebound. A wide short-term rate gap and the imminent US election risk still point to a short-term move to the 1.0750 area.

GBP: Reeves triggers first gilt shake-up

Unlike her ECB colleagues, Bank of England hawk Catherine Mann stuck to her usual tone yesterday, staying relatively pessimistic on disinflation and pointing to risks the BoE may cut too much too early. Three speeches by Governor Andrew Bailey this week have instead yielded little to no headlines. There is one last chance for Bailey to talk monetary policy at a Saturday event, so beware of some early Monday reaction in the pound.

Yesterday’s PMIs in the UK were softer than expected, and while still looking decent compared to the eurozone, they are probably adding a bit of extra pressure to the BoE. Still, the gilt market and the pound are now laser-focused on next Wednesday’s UK budget announcement.

Yesterday, Chancellor Rachel Reeves confirmed that she will change the fiscal rule to increase investments, which will pave the way to a potential increase in borrowing in the order of tens of billions. We discuss all this and the market sensitivity to the theme in our detailed UK budget preview. Gilts underperformed other developed market bonds after the fiscal rule announcement, and there seems to be a consensus view that UK yields have extra room to rise on budget news. From an FX market perspective, what matters is whether any gilt underperformance turns into uncontrolled volatility. Given the pound is pricing in no risk premium, the downside risks for the currency would be very large.

For now, we reiterate a bearish bias on GBP/USD, which can suffer from defensive positioning ahead of the combined UK budget and US election risks. Our view remains that 1.28 can be reached in the near term.

CEE: CNB seems confident about inflation

The region's currencies tried to stabilise yesterday after the painful previous days, but as we mentioned earlier, it seems that we have to get used to higher volatility and depreciation pressure, at least until the outcome of the US election. In the Czech Republic, yesterday, we saw the first statement from the Czech National Bank (Jan Prochazka) ahead of the start of the blackout period next week on Thursday. The interview suggests a continuation of the current pace of rate cuts of 25bp per meeting despite the CNB seeing the possibility of inflation exceeding 3% in December. This seems dovish given the recent upside surprises in inflation, and we can assume that other statements may be similar given that board members have already had a chance to see the central bank's new draft forecast. Our economists see a pause in December due to higher inflation and we will still see two more inflation prints between the November and December meetings which may change the picture given the upside risks at the moment, however, yesterday comments suggest a confident CNB.

The market has turned very hawkish in recent weeks due to the global sell-off and even after yesterday's correction is only pricing in roughly 35bp rate cuts for the next two meetings combined. Yesterday's dovish comment is in line with the global dovish narrative, so the result has been a bigger rally in rates than elsewhere. On the other hand, the Czech koruna remains the only currency in the region resilient to global volatility, touching 25.20 EUR/CZK yesterday, the lowest since late September. As we mentioned earlier, the CZK is our favourite currency in the region at the moment, and it seems to be working well. On the other hand, the Polish zloty and Hungarian forint remain on the defensive side with some stabilisation yesterday, but we still believe that current global conditions do not support the fading of previous losses at the moment.

The Philippine peso and Thailand's baht led declines among Asian currencies on Friday adding to recent losses on bets the US Federal Reserve will slow rate cuts, while regional stocks were mixed on uncertainty about the Nov 5 US election outcome.

The peso fell 0.6% to 58.27 per US dollar, a level last seen on Aug 2, while the rupiah was down 0.4% by 0345 GMT. The Singapore dollar, Malaysian ringgit, and South Korean won all fell between 0.1% and 0.3%.

The dollar index edged up 0.04% to 104.09, after reaching a three-month high of 104.57 earlier this week. The index is on track for a 3.6% gain since the week ending Sept 23, and poised to record its strongest weekly performance since Sept 30.

The greenback is strengthening as investors revise their expectations away from a significant Federal Reserve rate cut and factor in the potential for a second presidency for Republican Donald Trump, who has promised high tariffs and tax cuts. Those policies would stoke inflation and slow rate cuts, and could affect trading partners' currencies.

The market was completely pricing in a cut of at least 25 bps a month ago, with a 58.2% chance of a 50 bps cut, according to CME's FedWatch Tool.

"As the US elections approach and Trump trades are being implemented, the dollar is likely to remain on the front foot and US rates likely to remain elevated, creating a somewhat painful backdrop for EM assets," analysts at Barclays wrote.

Meanwhile, the rupiah has fallen by 1% so far this week, set for its worst week since Sept 30.

However, the reappointment of Sri Mulyani Indrawati as the finance minister on Oct 21 under newly sworn-in President Prabowo Subianto — her third consecutive presidential administration — signals policy continuity and stability to investors, allaying earlier concerns about her potential absence from the new government.

In Thailand, the baht has fallen nearly 1.5% so far this week in holiday-thinned trade.

Bank of Thailand deputy governor Piti Disyatat, in an interview with Reuters, said Thailand's low and well-anchored inflation poses no risk of deflation and the economy is converging to trend growth. He reiterated that the central bank's rate cut last week was not the start of an easing cycle.

Among Asian equities, stocks in Bangkok were flat on Friday but were on track for their worst week since mid-April, having lost nearly 2%. Singapore equities fell 0.5% and were set for their biggest weekly loss since early August. 

Source: The edge markets