Malaysia

Exports In June Increased By 7.9% YoY, a significantly slower pace from the May’s 16.2% expansion and far below market expectations for a 15.0% rise. This is due to the stronger than expected month-on-month decline, which fell by 5.5%, due to a fall in demand from the USA, China and Japan. Nevertheless, for the whole of 2Q14, exports expanded by 14.2% YoY (1Q14: 10.8%), the strongest annual quarterly rise since 2Q10. Imports also performed below expectations, increasing by just 9.3% against consensus’ estimates for a 12.9% growth. For the 2Q14, imports rose by 8.6% YoY (1Q14: 5.5%). As a result of weaker than expected exports, trade surplus narrowed to RM4.0b from RM5.7b. However, trade surplus nearly double to RM44.7b from RM24.6b in the 1H13. Total trade in June increased by 8.5% from 14.1% in May, 11.5% in the 2Q14 (1Q14: 8.3%) and by 9.9% for the 1H14 (1H13: -0.1%). (Please refer to Economic Viewpoint for further comments)

Asia

Thailand Holds Rate A Third Time As Growth Outlook Improves. Thailand kept its key interest rate unchanged for a third straight meeting as spending and consumer confidence improved after a military coup ended months of political unrest. The Bank of Thailand held its one-day bond repurchase rate at 2%, with monetary policy committee members voting unanimously in favor of the decision, it said in Bangkok today. All 22 economists in a Bloomberg News survey predicted the outcome, which extended the pause since a cut in March. (Bloomberg)

South Korea: New Tax Laws To Increase Firms’ Spending On Staff. South Korea will introduce a new set of tax rules aimed at encouraging companies to increase dividend payouts, spend on their workers and invest in production facilities, the Finance Ministry said yesterday. The move is a follow-up to stimulus measures that the finance minister introduced last month to boost domestic demand and keep Asia’s fourth-largest economy on a firm recovery path in the face of sustained weakness in global demand. The new rules will give tax breaks to companies that increase spending on employment and investment while it levies a tax on those holding excessive cash reserves, the Ministry of Strategy and Finance said in a statement. (Reuters)

North America

Trade Gap Shrinks To Five-Month Low As U.S. Imports Drop. Imports dropped in June by the most in a year as the U.S. economy moved closer to energy independence, helping the trade deficit unexpectedly narrow. The gap shrank 7% to $41.5bil, the smallest since January, from May’s $44.7bil, Commerce Department figures showed today in Washington. The drop in purchases of foreign goods from the highest levels on record included declines in autos, cellular phones and the lowest petroleum imports in more than three years. (Bloomberg)

Canada Trade Surplus Biggest Since 2011 On Record Exports. Canada reported the largest merchandise trade surplus in more than two years in June as exports reached a record on gains in crude oil and metals. The surplus was C$1.86bil ($1.69bil) in June, the widest since December 2011, Statistics Canada said today in Ottawa. Economists forecast the trade account would be balanced, according to the median of 17 forecasts in a Bloomberg News survey. The agency revised the May figure to a C$576 million surplus, from a C$152 million deficit. (Bloomberg)

Canada-EU Free Trade Deal May Pave Way For US Agreement. Canada and the European Union have agreed the final text for a free trade agreement that could provide a blueprint for a US-EU trade deal. Tuesday's deal will cut tariffs between Canada and the EU by 98% and could boost trade by 20%, or about $20bil. The 1,500 page document still has to be translated into 23 languages and reviewed by lawyers. It is expected to be ratified by Canada's 10 provinces and the EU's 28 member states by 2016. Many are seeing it as a template for US-EU trade talks. (BBC)

Europe

U.K. Industrial Production Increases Less Than Forecast. U.K. industrial production rose less than economists forecast in June and the output estimate for the second quarter was revised lower. Production increased 0.3% from May, when it fell 0.6%, the Office for National Statistics said in London today. The median forecast of 32 economists in a Bloomberg News survey was for an increase of 0.6%. Output in the second quarter rose 0.3%, below the 0.4% estimate published in last month’s gross domestic product data. (Bloomberg)

Italy's Economy Slides Back Into Recession. Italy slid into recession for the third time since 2008 in the second quarter, underlining the chronic weakness of the euro zone's No.3 economy and pressuring Prime Minister Matteo Renzi to complete promised reforms. Figures on Wednesday from statistics agency ISTAT showed gross domestic product unexpectedly declined by 0.2% in April-June from the previous three months. A Reuters poll of economists had forecast growth of 0.2%. The economy also shrank by 0.1% in January-March, meaning it has returned to recession, defined as two consecutive quarters of contraction. (Reuters)

German Orders Fall At Their Sharpest Rate In Almost Three Years In June. German industrial orders slid in June at their steepest rate since September 2011 as euro zone demand fell and geopolitical risks made firms cautious, suggesting this sector of Europe's largest economy will have a weak start to the third quarter. Contracts fell by 3.2% on the month as orders from the single currency bloc plunged by 10.4%, data from the Economy Ministry showed. That missed the Reuters consensus forecast for a 1.0% rise and undershot even the lowest estimate for a 0.5% decrease. (Reuters)

Irish Era Of Deep Austerity Cuts Over: Deputy PM. Ireland will end the kind of austerity measures required under its EU/IMF bailout when it sets its budget for 2015 in October as the economy looks to be growing faster than expected, the deputy prime minister said on Wednesday. Ireland's coalition government won praise in Europe for meeting all major targets under the 85bil euro ($113bil) aid programme it completed last year but suffered at midterm elections in May as voters expressed frustration at more than half a decade of budget cuts. That prompted a change of leadership in the Labour Party, the junior partner in government, and its new leader, Deputy Prime Minister Joan Burton, told Reuters that the era of severe tax hikes and spending cuts had come to an end - even though the budget still needs to be squeezed. (Reuters)

Currencies

Euro Weakest Against The Dollar In Nine Months. The euro fell to its lowest point against the dollar in nine months as Italy, the euro zone’s fourth-largest economy, slipped into a recession and Russia appeared closer than ever to invading Ukraine. The euro fell to $1.3350 Wednesday, down from $1.3371 Tuesday evening, after Italy reported a surprise fall in GDP during the second quarter, a contraction that moved the country back into a recession for the third time in five years. The euro hit its lowest point against the yen in seven months, falling to ¥136.63 from ¥137.19 Tuesday. The euro was up against the pound sterling at £79.32 from £79.21 Tuesday as U.K. stocks were also pressured by worries about rising tension in Russia and Ukraine. The ICE U.S. dollar index, a measure of the greenback’s strength against a basket of six other currencies, rose to 81.5990 from 81.3280 as investors, spooked by Russia’s troop buildup near its border with eastern Ukraine, sought safety. (MarketWatch)

Commodities

U.S. Crude Settles At 6-Month Low, Brent Also Languishing. Oil prices fell on Wednesday as abundant supplies in the United States drove the U.S. contract to its lowest close in six months, while Brent prices floundered near nine-month lows. U.S. crude for September delivery lost 46 cents to settle at $96.92 a barrel, its weakest settlement since Feb. 3. Brent crude oil lost 2 cents settle at $104.59 a barrel, its lowest close since Nov. 7. (Reuters)

Gold Rises 1.6% On Worries Over Ukraine, Growth. Gold rose 1.6% on Wednesday on safe-haven buying, triggered by worries there could be an escalation of the military conflict in Ukraine and by a weak undertone in global equities. Spot gold was up 1.6% at $1,308.15 an ounce at 2:04 a.m. EDT (1804 GMT), its biggest one-day gain since June 19. Among other precious metals, silver rose 1.7% to $20.03 an ounce, rebounding from a seven-week low in the previous session. Platinum was up 0.9% to $1,461.10 an ounce, while palladium edged up 0.3% to $846.78 an ounce. (Reuters)