Global

BRICS Nations To Create $100bn Development Bank. The leaders of the five Brics countries have signed a deal to create a new $100bn development bank and emergency reserve fund. The Brics group is made up of Brazil, Russia, India, China and South Africa. The capital for the bank will be split equally among the five participating countries. The bank will have a headquarters in Shanghai, China and the first president for the bank will come from India. At first, the bank will start off with $50bn in initial capital. The emergency reserve fund - which was announced as a "Contingency Reserve Arrangement" - will also have $100bn, and will help developing nations avoid "short-term liquidity pressures, promote further Brics cooperation, strengthen the global financial safety net and complement existing international arrangements". The creation of the Brics bank will almost surely create competition for both the World Bank and other similar regional funds. (BBC)

Malaysia

S&P To Keep Ratings On Malaysia For 20 Months. Standard and Poor’s (S&P) said yesterday it will maintain Malaysia’s sovereign rating for the next 20 months, expressing concern about the country’s public debt position and fiscal performance. Malaysia, rated A-/Stable/A-2 in terms of its sovereign foreign currency ratings for the past seven years, has strengths in terms of external liquidity and international investment position, and monetary flexibility. However, effectiveness, economic structure and growth, fiscal flexibility and government debt burden were rated “neutral”. S&P said Malaysia needs to reduce its fiscal deficit to gross domestic product (GDP) ratio and control its public debt ratio. Its national debt ratio stands at 54 per cent to the GDP. (NST)

Asia

S’pore GDP Contracts For First Time In 7 Quarters. Singapore’s economy contracted in April to June for the first time in seven quarters, hit by a sharp drop in manufacturing activity, but economists said the weak reading was unlikely to alter the outlook for the city-state’s tight monetary policy. Singapore’s gross domestic product (GDP) shrank by 0.8 per cent in the second quarter on a seasonally adjusted and annualised basis, the Ministry of Trade and Industry’s advance estimates showed yesterday, a much weaker outcome than the median forecast of 2.5 per cent growth seen in a Reuters survey. Manufacturing fell 19.4 per cent in the second quarter on a quarter-on-quarter, seasonally adjusted and annualised basis, down sharply from 12.2 per cent growth in the first quarter, the data showed. (Reuters)

BOJ Keeps View Inflation To Accelerate Toward 2% Target. Governor Haruhiko Kuroda signaled confidence in the Bank of Japan’s bid to drive inflation to 2 % as the central bank maintained unprecedented stimulus. The BOJ stuck with its goal to increase the monetary base by 60 trillion yen to 70 trillion yen ($690 billion) per year, it said in a statement today, as forecast by all 34 economists surveyed by Bloomberg News. Consumer prices excluding fresh food will rise 1.9 % in the year starting April 2015, the median estimates of board members showed, matching its forecast three months ago. (Bloomberg)

China Jan-June FDI Rises 2.2%. Foreign direct investment (FDI) into China rose 2.2 % to $63.33 billion during the first six months of this year, the government announced Tuesday. For the month of June alone, FDI - which excludes investment in financial sectors - inched up 0.2 % year-on-year to $14.42 billion, the commerce ministry said. But it was a substantial jump on May's $8.6 billion, according to previous figures. The ministry also announced that for the first six months China's overseas investment in non-financial sectors fell 5.0 % year-on-year to $43.34 billion. (Bernama)

China June New Bank Loans Beat Expectations. Chinese banks lent a much stronger-than expected 1.08 trillion yuan ($173.9 billion) worth of new yuan loans in June as Beijing steps up efforts to stimulate the world's second-largest economy. Markets had expected banks to write 915 billion yuan in new loans for the month, up modestly from May. Broad M2 money supply jumped 14.7 % last month from a year earlier, the People's Bank of China said in a statement on its website on Tuesday, also higher than a forecast of 13.5 % in a Reuters poll of economists. The People's Bank of China has pledged to keep credit and money supply growth at a reasonable level to meet the needs of the real economy. It aims for a 13 % annual rise in M2 this year. (Reuters)

China Fiscal Spending Up 26% To US$265.84bil. China’s fiscal expenditure surged 26.1% in June from a year earlier to 1.65 trillion yuan (US$265.84bil), reflecting government efforts to speed up spending to shore up the economy. Spending growth accelerated from a rise of 24.6% in May. Of the total 6.9 trillion yuan of government spending in the first six months, money disbursed on public housing projects grew the most, surging 30.2% from a year earlier to 201.9 billion yuan, the finance ministry said yesterday. (Reuters)

USA

Broad-Based Sales Gain Points To Stronger Growth. Sales at U.S. retailers climbed in June as department stores, clothing outlets and Internet merchants led a broad-based gain that will help provide momentum for the economy in the second half of the year. The 0.2 % gain in purchases followed a 0.5 % advance in May that was larger than previously reported, Commerce Department figures showed today in Washington. While the increase was less than projected, due to an unexpected decline in auto sales, demand climbed in nine of 13 major retail categories. (Bloomberg)

US Business Inventories Up, Retail Stocks Rise Modestly. U.S. business inventories rose in May, suggesting restocking will still be a boost to growth in the second quarter even as stocks at non-automobile retailers rose marginally. The Commerce Department said on Tuesday inventories increased 0.5 % after rising 0.6% in April. Economists polled by Reuters had forecast inventories, which are a key component of gross domestic product changes, rising 0.6 % in May. Retail inventories, excluding autos, which go into the calculation of GDP, edged up 0.1 % after a similar gain in April. (Reuters)

US Import Prices Barely Rise In June. U.S. import prices rose less than expected in June as a drop in the cost of food offset an increase in petroleum, suggesting imported inflation pressures remained benign. The Labor Department said on Tuesday import prices edged up 0.1 % last month after increasing by a revised 0.3 % in May. Economists polled by Reuters had forecast import prices rising 0.3 % after a previously reported 0.1 % gain in May. In the 12 months through June, prices increased 1.2 %, the largest rise since March 2012. (Reuters)

U.S. CBO Forecasts 2039 Public Debt At 106% Of GDP. U.S. public debt remains on an unsustainable path and will reach 106 % of economic output in 25 years versus about 74 % currently, the Congressional Budget Office said on Tuesday, marking a slight increase from projections made last September. The non-partisan budget referee agency attributed the changes in its long-term budget outlook based on current tax and spending laws to a slight downward revision in its economic growth projections, partly offset by assumptions of reduced interest rates and health care costs. The revisions represent essentially no shift in the CBO's view that despite some near-term relief, the federal deficits are unsustainable and could lead to another financial crisis in the long run. It attributes much of the increase in deficits and debt through 2039 to the costs of caring for an aging population, especially the so-called Baby Boom generation. (Bloomberg)

Yellen Defends Loose Fed Policy, Says Job Market Still Too Weak. Federal Reserve Chair Janet Yellen said U.S. labor markets are far from healthy and signaled the Fed will keep monetary policy loose until hiring and wage data show the effects of the financial crisis are "completely gone." Despite strong recent jobs reports and other signs of continuing recove ry, Yellen emphasized in testimony to the Senate Banking Committee that she won't conclude the economy has recovered until wages start rising and discouraged workers return to the labor force. Yellen said the one thing that might prompt the central bank to raise rates earlier or faster is if hiring and wages take off in an unexpected way. So far, there is little evidence that is happening in a country with still high unemployment, and labor force participation at its lowest level in a quarter century. (Reuters)

Europe

UK Inflation In Sharp Rise To 1.9% In June. The rate of UK inflation rose sharply in June, pushed up by higher clothing, footwear, food and non-alcoholic drinks prices, official figures show. The Consumer Prices Index rose to 1.9%, up from 1.5% in May, according to the Office for National Statistics. Women's clothing prices contributed heavily to the rise. Air fares and furniture prices also pushed the inflation rate up, the ONS said. The rate is now close to the Bank of England's 2% target. It has remained below the target for seven consecutive months. Inflation as measured by the Retail Prices Index (RPI), which includes housing costs, rose to 2.6%, up from 2.4% in May. Separately, figures from the ONS showed that annual house price inflation hit 10.5% in May. (Reuters)

Currencies

China Eases Forex Rules. China has loosened currency controls to make it easier for domestic companies and individuals to set up special-purpose vehicles (SPVs) overseas, according to revised rules published by the nation’s foreign exchange regulator. Under revised rules that took effect on July 4, domestic investors in SPVs are allowed to keep profits and dividends made from such entities overseas. Previously, they must repatriate such funds within 180 days. The regulator had lifted a ban on loans made by domestic firms to their overseas SPVs – entities created for a specific, limited and normally temporary purpose – and simplified rules on the establishment of such entities, it said. (Reuters)

Dollar Rallies After Yellen Drops Hints On Interest Rates. The dollar rallied after the head of the Federal Reserve suggested the central bank could accelerate plans to raise interest rates if the jobs market continues to improve more rapidly than anticipated. The euro traded at $1.357 Tuesday afternoon, down from $1.3619 late Monday. The dollar rose to 101.65 yen, compared to ¥101.55 late Monday. The pound climbed to $1.7144, up from $1.7088 late Monday, according to FactSet data. Against the euro, sterling appreciated to €1.2635, from €1.2543 Monday. Dollar Index, a measure of the dollar against a basket of major currencies, was up 0.1% at 73.00. (Market Watch)

Commodities

Oil Rout Deepens As Libya, Economic Data Feed Oversupply Worries. Oil prices dropped by as much as $2 on Tuesday, deepening their biggest slide this year as rising Libyan supplies and downbeat economic data sharpened concerns the global market was heading into a near-term glut. Brent futures lost 96 cents to settle at $106.02 a barrel, recovering from a low of $104.39 a barrel earlier in the session, the weakest point since April 2. The selloff is expected to continued this week as investors liquidate ahead of Wednesday's futures contract expiry. U.S. crude futures lost 95 cents to settle at $99.96 a barrel. It had slipped to a low of $99.01 a barrel earlier in the session, breaking the 200-day moving average of $99.92, a key technical indicator closely watched by traders. (Reuters)

Gold Falls Below $1,300/Oz On Fed Report, Dollar Rise. Gold fell below $1,300 an ounce to a four-week low on Tuesday, as the dollar rose and bullion investors focused on a U.S. Federal Reserve monetary policy report which showed the central bank is set to end its bond-buying stimulus by October. Spot gold was down 0.6 % at $1,298.90 an ounce by 11:40 a.m. EDT (1540 GMT), having earlier dropped to $1,291.70, the lowest since June 19. Among other precious metals, platinum slipped by 0.3 % to $1,483.10 an ounce, while palladium was down by 0.2 % to $866.15 an ounce and silver fell 0.3 % to $20.81 an ounce. (Reuters)