Malaysia

Exports Posted Its 5th Consecutive Month Of Decline In June, falling by 6.9% YoY following an upward revision of a 5.1% tumble in May (5.8% previously). In addition to a higher base effect, the annual contraction is largely due to sluggish demand from China, the USA and Japan. On a monthly comparison however, exports grew by 1.7%.  MoM. On the other hand, imports bounced back by 1.3% YoY in June after suffering a 2.3% decline previously. On a monthly comparison however, imports continued to fall, albeit at a smaller rate of 0.9% (May: -3.4% MoM). Despite the slump in exports growth, absolute amount saw better performance in exports in comparison to imports, which led to a trade surplus of RM4.3b, nearly double of that in the previous month, which was revised upwards to RM2.9b (from RM2.5b).  Total trade fell by 3.2% YoY. (Please refer to Economic Viewpoint for further comments) 

Vehicles Sales Starts H2 On High Gear. Total industry volume almost hits 67,000 units as Raya incentives drive bookings. The local automotive industry started the second half of the  year in top gear as new vehicle sales hits one of its best monthly volume in history, driven by Hari Raya offerings. Most car companies reported bumper sales in July, with the total industry volume (TIV) hitting almost 67,000 units due to attractive festive packages from the carmakers. According to Malaysia Automotive Institute (MAI) chief executive officer Madani Sahari, TIV soared to 66,895 units during the month. This is in stark contrast to the TIV last July, which plunged 18 % month-on-month and 7% year-on-year to  46,637 units. The TIV in June this year dropped 5%  year-on-year but rebounded 8% month-on-month to 53,631 units. (Business Times)

Asia 

Asian Exports Drop Despite US Recovery. The United States economy may have stopped sneezing, but Asia's exports are still laid up with a nasty cold. Growth in exports from seven of East Asia's biggest exporters - Japan, China, South Korea, Taiwan, Thailand, Hong Kong and Singapore - slowed to a halt in the second quarter, according to national trade data compiled by Reuters, led by a 9 % drop in exports to the European Union (EU) compared to a year earlier. Exports from China to the EU dropped 8 %, and fell 20 % from Japan, marking a seventh straight quarter of declines. Exports to the US dropped 2.4 %, led by a 21 % drop in exports from Hong Kong and a 7% decline from Japan. (Reuters)

China's Services Sector Sees Modest Expansion. Activity in China's services sector defied the country's economic cooldown to expand modestly last month, a private survey showed yesterday, as new business orders recovered from a multi-year low in a rare sign of resilience.  But that was tempered by a fall in prices charged by companies to a nine-month low, suggesting demand was still too weak for them to raise prices, and as business expectations hovered near their lowest since 2005. The HSBC/Markit Purchasing Managers' Index (PMI) for the services industry stood at 51.3 in July, unchanged from June and just a whisker above a 20-month low of 51.1 struck in April. A reading above 50 suggests business grew compared to a month ago, while an outcome below 50 points to contraction. (Reuters) 

IMF Urges Japan To Stick To Two-Stage Sales Tax Hike. The International Monetary Fund said it was essential that Japan go ahead with a scheduled two-stage doubling of its sales tax from next year amid signs the government is reconsidering the plan out of concern it could derail a nascent economic recovery. The IMF also called for the Bank of Japan to be ready to expand its asset-buying scheme or shift the mix of assets being purchased if inflation does not pick up as envisaged, or if government bond markets became volatile again. With Japan's huge public debt leaving the country little room to offer additional fiscal stimulus, monetary policy should be the first line of defense against risks to growth such as weakening exports to China, the IMF said in a detailed report on its annual consultations with policymakers released on Monday. Japan is due to raise its sales tax in April to 8 % from 5 %, and to 10 % in October 2015. The IMF said the hike was an "essential first step" to fix Japan's fiscal problems, and should not be delayed. (Reuters)

USA

Services Expansion Points To Pickup In U.S. Growth. Service industries in the U.S. expanded in July at the fastest pace in five months, complementing a rebound at the nation’s factories and showing the economy is gaining traction. The Institute for Supply Management’s non-manufacturing index increased to 56, exceeding all forecasts in a Bloomberg survey of economists, from a more than three-year low of 52.2 in June, a report from the Tempe, Arizona-based group showed today. (Bloomberg)

Employment Index In U.S. Rose In July By Most In Five Months. A measure of job prospects in the U.S. climbed in July by the most in five months, a sign the labor market is improving. The Conference Board’s Employment Trends Index increased 0.4 %, the biggest gain since February, the New York-based private research group said today. At 112.2, the gauge reached the highest level since June 2008 and was up 4.1 % from a year earlier. (Bloomberg)

Fed Loan Survey Shows Easier Lending For Mortgages, Businesses. U.S. banks are seeing an increase in demand for credit and are providing loans more readily to home buyers and businesses, according to a Federal Reserve survey. “Domestic banks, on balance, reported having eased their lending standards and having experienced stronger demand in most loan categories over the past three months,” the central bank said in its quarterly survey of senior loan officers released in Washington  today. The report adds to evidence that credit conditions are contributing support to an economy beset by federal budget cuts. The Federal Open Market Committee reviewed the report at a meeting last week at which it concluded that “economic growth will  pick up from its recent pace.” (Bloomberg)

Europe

July Heatwave Provides A Boost To UK Retail Sales. Retail sales enjoyed their fastest July growth in seven years, thanks to the month's heatwave, according to the British Retail Consortium (BRC). On a like-for-like basis, the BRC said sales had been up 2.2% compared with last year, as consumers rushed out to buy swimwear, sandals, sun cream, beer and barbecue foods. July was the third successive month of improving figures. (BBC)

Euro-Area July Services Output Contracts Less Than  Estimated. Euro-area services output shrank at a slower pace than initially estimated in July, adding to evidence the economy is gathering strength to pull out of a record-long recession. An index of activity in the services industry based on a survey of purchasing managers rose to 49.8 from 48.3 in June, London-based Markit Economics said in a report today. That’s above an initial estimate of 49.6 on July 24. A reading below 50 indicates contraction. (Bloomberg)

Euro-Area Investor Sentiment Rises On Central Bank Boost. Euro-area investor confidence improved in August, adding to signs that the 17-nation currency bloc may be emerging from its longest-ever recession, according to the Sentix research institute. An index measuring sentiment in the region rose to minus 4.9 from minus 12.6 in July, Limburg, Germany-based Sentix said today in an emailed statement. Economists predicted a figure of minus 10, according to the median of 17 estimates in a Bloomberg News survey. Gauges of economic expectations and current conditions also improved. (Bloomberg)

UK Services Growth At Six-Year High, PMI Survey Suggests. The UK's services sector has expanded at its fastest pace since December 2006, a survey has indicated. The Markit/CIPS Services Purchasing Managers' Index (PMI) rose to 60.2 in July from 56.9 the month before, a stronger showing than economists had expected. Any reading above 50 indicates growth. The numbers complete a trio of positive PMI figures for July, after strong showings in both the construction and manufacturing sectors last week. Markit said its UK All Sector PMI, which combined the three, was 59.48, the highest since its records began in January 1998. (BBC)

Currencies

Dollar Falls As Jobs ‘Fatigue’ Sets In. The dollar fell broadly on Monday as a better-than-expected reading on activity in the U.S. service sector failed to overcome last week’s below-consensus report on job growth in the U.S and its implications for a slowing of Federal Reserve stimulus. Against the Japanese yen, the dollar fell to ¥98.27 from ¥98.93 late Friday. The British pound rose 0.5% to $1.5354 from $1.5282. The U.K. services purchasing  managers’ index surged in July, beating expectations and supporting U.K. stocks Monday. The ICE dollar index, which tracks the greenback’s movement against six rivals, was at 81.868 in recent trade, lower than 81.934 late Friday in North America. Meanwhile, the  euro slipped to $1.3253 from $1.3281 on Friday. The  Australian dollar edged up to 89.24 U.S. cents from 89.01 cents late Friday. (Market Watch) 

Commodities

Brent Rises Above $109 On China Data; Iran Comments Weigh. Brent oil rose above $109 a barrel on Monday after promising China data, but prices may struggle to hold on to gains as risk premiums come off after Iran and the United States signalled a fresh will to end the dispute over Tehran's nuclear programme. Brent crude gained 5 cents to $109 a barrel by 0257 GMT, after touching as low as $108.30 and hitting an intraday high of $109.13. U.S. oil fell 2 cents to $106.92, after slipping to as low as $106.01. (Reuters)

Gold Drops On Strong U.S. And UK Economic Data. Gold dropped in quiet trading on Monday after signs of an improving British business sector and better U.S. manufacturing activities dampened bullion's appeal as an investment hedge. Spot gold was down 0.6% at $1,304.06 an ounce by 2:46 p.m. EDT (1846 GMT). Among other precious metals, silver  fell 0.8 % to $19.74 an ounce. Platinum rose 0.3 % to $1,449.75 an ounce and palladium gained 0.2 % to $731.22 an ounce. (Reuters)