KUALA LUMPUR, April 2 (Bernama) -- Bursa Malaysia reversed yesterday's gains to close lower on Thursday, with the key index settling off its lows, as optimism over a swift end to the West Asia conflict faded sharply following US President Donald Trump's speech this morning, which fuelled global risk-off sentiment. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) fell 10.60 points, or 0.62 per cent, to 1,698.30 from Wednesday's close of 1,708.90. The benchmark index opened 3.14 points firmer at 1,712.04, and moved between 1,688.89 and 1,712.80 throughout the day. Market breadth was negative with 744 losers outpacing 374 gainers, while 436 counters were unchanged, 1,094 untraded, and 11 suspended. Turnover slipped to 3.20 billion units worth RM3.50 billion from yesterday’s 3.58 billion units worth RM3.56 billion.
Global bond markets came under pressure as rising oil prices and prolonged geopolitical tensions pushed yields higher, forcing investors to reassess expectations for monetary easing.
Yields Jump as Inflation Risks Intensify
The US 10-year Treasury yield climbed to 4.376%, rising 5 basis points, while the 2-year yield increased to 3.856%, reflecting heightened concern over inflation.
The move follows comments from Donald Trump, which offered little clarity on ending the Gulf conflict and no commitment to reopening the Strait of Hormuz, a critical global energy route.
Oil Surge Drives Market Repricing
Oil prices reacted sharply, with Brent crude jumping 6%, amplifying fears of sustained inflation.
The disruption to the Strait of Hormuz has created bottlenecks across global supply chains, affecting a wide range of industries including:
- Fuel and energy products
- Chemicals and fertilisers
- Pharmaceuticals and construction materials
In the US, gasoline prices have already exceeded US$4 per gallon in some states, highlighting the immediate impact on consumers.
Fed Rate Cut Expectations Collapse
Markets have rapidly shifted their outlook on US monetary policy.
- No rate cuts are now expected in 2026, compared to 50 basis points of easing priced in before the conflict
- Investors are increasingly considering the possibility of rate hikes instead, depending on economic data
This repricing reflects concerns that inflation could remain elevated, limiting the Federal Reserve’s flexibility.
Inflation Indicators Flash Warning Signs
A recent manufacturing survey showed its prices-paid index surged 19 points in two months, reaching levels consistent with ~4% annual inflation.
This suggests that cost pressures are already feeding into the real economy, potentially squeezing margins and consumer spending.
Labour Market Data in Focus
Attention now turns to the upcoming US payrolls report, with expectations for a 60,000 rebound in job creationfollowing a weak February.
A stronger-than-expected print could further reinforce the case for tighter monetary policy, pushing yields even higher.
Outlook: Inflation vs Growth Dilemma
Markets are now grappling with a classic stagflation risk scenario:
- Higher energy prices driving inflation
- Rising costs acting as a drag on economic growth
The trajectory of yields and policy will largely depend on:
- The duration of the conflict
- Whether the Strait of Hormuz reopens
- Incoming economic and inflation data
Investor Takeaways
- US Treasury yields are rising sharply, reflecting renewed inflation concerns.
- Oil prices surged 6%, driven by prolonged disruption in the Strait of Hormuz.
- Markets have fully priced out Fed rate cuts, with potential for rate hikes emerging.
- Inflation indicators are already showing accelerating cost pressures.
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