KUALA LUMPUR, Nov 5 (Bernama) -- Bursa Malaysia closed higher, buoyed by Bank Negara Malaysia’s (BNM) decision to maintain the Overnight Policy Rate (OPR) at 2.75 per cent, alongside positive cues from Wall Street. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 19.30 points, or 1.19 per cent, to 1,635.86 from Wednesday’s close of 1,616.56. The benchmark index opened 6.72 points higher at 1,623.28, and fluctuated between an intraday high of 1,642.44 and a low of 1,622.62 during the trading session. However, market breadth was negative, with losers outnumbering gainers 723 to 497, while 466 counters were unchanged, 1,075 untraded and 10 suspended. Turnover rose to 3.74 billion units valued at RM3.61 billion compared with yesterday’s 2.81 billion units valued at RM2.57 billion.
The interest rate gap between the US and eurozone is set to widen, presenting significant challenges for President-elect Donald Trump’s trade ambitions. While the US economy demonstrates resilience, Europe’s struggles with weak growth and higher urgency for rate cuts could further strengthen the US dollar, making it harder to boost exports.
Key Highlights:
US-Euro Rate Divergence:
- The Federal Reserve and European Central Bank (ECB) are both cutting rates, but Europe’s economic struggles mean more aggressive easing is expected from the ECB.
- The US dollar has already strengthened 5% against the euro this year, with the rate gap poised to exceed 2 percentage points in 2025.
Trump’s Trade Policy Pressure:
- A stronger dollar undermines US export competitiveness, clashing with Trump’s focus on boosting trade.
- Tariffs aimed at Europe and other trade partners could exacerbate inflation, potentially forcing the Fed to maintain higher rates for longer.
Economic Resilience in the US:
- Solid growth and robust consumer demand have tempered expectations for aggressive Fed rate cuts.
- Energy independence and fixed-rate mortgages shield US consumers from the effects of tighter monetary policy.
- The Bloomberg Dollar Spot Index has risen 6.3% this year, indicating the dollar’s growing strength.
Fed Challenges and Trump’s Legacy:
The widening rate gap echoes Trump’s first term when rate hikes drew criticism of Fed Chair Jerome Powell. With the potential for renewed clashes, Trump’s tariff-driven policies may further strain the relationship between the administration and the central bank.
Europe’s Struggles:
- Europe’s post-pandemic recovery lags behind the US, hindered by higher energy costs and inflationary pressures.
- Tariff threats from the Trump administration present additional risks to European growth.
Outlook for 2025:
While markets anticipate rate cuts from both the Fed and ECB, the Fed’s cuts are likely to be fewer, keeping rates higher for longer. Analysts predict this could sustain a strong dollar, potentially complicating Trump’s trade agenda but mitigating inflationary shocks from tariffs.
Despite the challenges, the strong US economy may provide a cushion for consumers against the negative impacts of tariffs, balancing some of the risks associated with a stronger dollar.
Comments
Post a Comment