Malaysia

OPR Raised By 25bps. The BNM Monetary Policy Committee (MPC) has decided to raise the Overnight Policy Rate by 25 basis points (bps) to 3.25%, its first adjustment since May 2011. The floor and ceiling rates is correspondently raised to 3.00% and 3.50% respectively. In a statement, BNM said the decision was largely based on firmer growth prospects and the fact that inflation remains above its long-run average. Referring it to the “normalisation of monetary conditions” the decision also aims “to mitigate the risk of broader economic and financial imbalances that could undermine the growth prospects of the Malaysian economy.” (Please refer to Economic Viewpoint for further comments)

Industrial Production In May Rose By 6.0%, above market expectations of 4.2%. This is due to a robust growth from manufacturing, backed by continued expansion in the E&E and transport equipment & machinery sectors. On a monthly comparison, production increased by 3.2% whilst the seasonally adjusted index saw a 0.6% expansion. For the first five months of the year, industrial production growth by an average of 5.1% YoY, in comparison to 2.2% seen in the same period in 2013. (Please refer to Economic Viewpoint for further comments)

Subsidy Rationalisation Decision By Q4. The government will decide on the subsidy rationalisation programme by the fourth quarter of the year and will implement it next year, said Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah yesterday. By then, the government will also decide whether the RON95 petrol and diesel should be exempted from the Goods and Services Tax (GST), which will be implemented on April 1 next year. He said the government is looking at about RM2.5 billion revenue from GST in the first year of implementation, and RM8 billion in the following year. (Bernama)

Asia Pacific

India’s Reform Budget To ‘Revive Stalled Growth’. India’s new government introduced a reform-minded budget yesterday, vowing to lift economic growth rates to 7% to 8% by promoting manufacturing and infrastructure and overhauling populist subsidies. The budget for the fiscal year ending March 2015 is being closely watched as an indicator of whether Prime Minister Narendra Modi’s government will act quickly to deliver on promises to revive stalled economic growth. He said it would be daunting to keep the budget deficit for the year at 4.1 % of gross domestic product (GDP), as targeted by the previous government and it might end up at 4.5 %. In the two subsequent years, it is forecast to fall to 3.6 % and 3.0% of GDP, respectively. He indicated those reductions would involve overhauling expensive subsidies for food, fuel and fertiliser that cost the government some US$40 billion a year. He gave no details other than saying the subsidies would be “more targeted”. (AP)

China's Trade Surplus Narrows In June. China's trade surplus narrowed to $32bn in June after export growth slowed and imports increased, showing the economy is still stabilising after a weak start to the year. Exports rose by 7.2% from a year earlier, which was below market expectations for a 10.6% increase. Imports also missed forecasts, rising by 5.5% due to sluggish demand. (BBC)

BoK Keeps Base Rate Steady At 2.5%. South Korea’s central bank held interest rates steady and modestly scaled back its expectations for growth and inflation, a sign that rates will stay steady, but disappointed investors who had hoped its next move would be to cut borrowing costs. As expected, the Bank of Korea (BoK) left its policy interest rate unchanged at 2.5% for the 14th straight month and trimmed its economic forecasts to reflect recent softness, but its governor maintained the view that Asia’s fourth largest economy was still on a recovery track. (Reuters)

Japan Machinery Orders Fall 19.5% On Month In May. Japan's core machinery orders unexpectedly fell 19.5 % in May from the previous month, government data showed on Thursday, casting doubt over the outlook for a pickup in capital spending. The month-on-month decrease in core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, compared with economists' median estimate of a 0.7 % gain in a Reuters poll of economists. That followed a 9.1 % fall in April, data compiled by the Cabinet Office showed. (Reuters)

Australia’s Jobless Rate Back At 6pc. Australia’s unemployment rate returned to a decade high of six % last month, data showed yesterday, as the economy shed full-time jobs amid “challenging” conditions and as more people looked for work. The jobless rate pushed higher even as the economy added a seasonally adjusted 15,900 positions to take the number of people employed to 11.578 million, Australian Bureau of Statistics figures showed. The rise in the number of positions came through part-time roles, which jumped by 19,700 last month. (AFP)

USA

Drop In U.S. Jobless Claims Points To Healing In Labor Market. The number of Americans filing new claims for unemployment benefits fell last week to one of its lowest levels since before the 2007-09 recession, a sign of increasing health in the labor market. Other data on Thursday showed a rise in business inventories during May, bolstering expectations the economy was bouncing back from a weak first quarter. Initial claims for state unemployment benefits dropped by 11,000 to a seasonally adjusted 304,000 for the week ended July 5, the Labor Department said. Economists had expected no change in the number of first-time applications for jobless aid. (Reuters)

Wholesale Inventories Gain In May, Helping To Feed Growth Optimism. U.S. wholesale inventories rose in May, reinforcing the view that economic growth should surge in the second quarter following a weak first three months of the year. The Commerce Department said on Thursday wholesale inventories increased 0.5 % from a month earlier. The rise was just below economists' expectations for a 0.6 % gain. The gains were driven by increases in inventories of metals, autos, machinery and lumber. (CNBC)

Consumer View Of U.S. Economy Highest Since Early 2008. Consumer sentiment improved last week as Americans were more upbeat about the U.S. economy than at any time in the past six years. The Bloomberg Consumer Comfort Index rose to 37.6 in the week ended July 6, the third-strongest reading since the start of 2008, from 36.4 in the prior period. The gauge measuring views of the economy, which has surged 7.1 points since a mid-May low, reached the highest point since January 2008. (Bloomberg)

Europe

Bank Of England Keeps UK Interest Rates At 0.5%. The Bank of England has held UK interest rates at a record low of 0.5% for another month. The size of the Bank's economic stimulus programme, known as quantitative easing, was also kept unchanged at £375bn. Last month, Bank governor Mark Carney hinted that rates could increase later this year as the UK's economic recovery becomes more secure. When it comes, any rise in rates is expected to be small. (BBC)

UK Trade Deficit Widens In May. The UK's trade deficit widened in May, pushed up by aircraft imports, official data showed on Thursday. The Office for National Statistics (ONS) said the UK's goods trade deficit grew to just over £9.2bn from £8.8bn in April. The deficit was offset by UK's services sector, which had a £6.8bn trade surplus. This left an overall deficit for May of £2.4bn, compared with about £2.1bn in April. European Union countries are major importers of UK goods, but weak demand in the eurozone has hampered trade. In total, UK exports of goods increased by £0.1bn to £24.1bn, while imports of goods increased by £0.5bn to £33.3bn. (BBC)

Currencies

Dollar, Yen Up Against Euro On Espirito Santo Woes. The dollar rose against most major currencies Thursday as investors decided on basic risk-off trading following news that Portugal’s Espirito Santo Financial Group suspended trading in its own shares and bonds. The ICE dollar index, which measures the greenback against a basket of six rivals, rose to 80.152 from 80.032 on Wednesday. The yen has also benefited from Europe’s woes, with the euro trading at ¥137.700 Thursday, down from ¥138.000 on Wednesday. The euro was trading at $1.360, compared with $1.364 Wednesday. (Market Watch)

Commodities

Oil Prices Up, Ending Longest Losing Streak In Years. Oil prices rose on Thursday, ending their longest losing streak in years as traders bet a weeks-long decline had run too far. Brent crude gained 39 cents to settle at $108.67 a barrel. It hit a low of $107.76 earlier in the session, the weakest since May 9. U.S. crude gained 64 cents to settle at $102.93 a barrel, after hitting an intraday low of $101.55, the weakest price since May 16. (Reuters)

Portugal Bank Worry Drives Gold To 3-1/2 Mth High; More Upside Seen. Gold surged to 3-1/2 month highs on safehaven buying on Thursday after questions raised about the health of Portugal's top-listed bank sparked worry that a new euro zone banking crisis might be in the offing. At 5:00 p.m. EDT (2100 GMT), the spot price of bullion was up 0.7 % at $1,334.91 an ounce, after racing earlier to $1,345.00, its highest since March 19. Platinum, boosted lately by more demand for the autocatalyst metal from carmakers and also by supply problems in major producer South Africa, was up 0.8 % at $1,508 an ounce. It touched $1,518.25 earlier, a high since Sept. 4. Palladium was up 0.1 % at $869.20 an ounce, rising for a 14th session in a row. The sister metal to platinum peaked earlier at $875.60, the highest since February 2001. (Reuters)