Malaysia

At 6.4%, GDP Surpassed Estimates. Once again, Malaysia’s GDP surpassed estimates and posted a 6.4% YoY growth in the 2Q14, following the previous quarter’s 6.2%. This is against market estimates of 5.8% and our own 5.7%, mainly on account of very strong net exports, boosting manufacturing and trade related services. However, strong private sector investment was not enough to boost aggregate demand, which moderated to 5.7% from 7.4% previously, as a result of slower growth in overall consumption, still undergoing normalization due to higher costs. On a quarterly comparison, the GDP increased by 3.5%, following the 3.9% decline in the 1Q14. For a more accurate gauge, the QoQ seasonally adjusted growth saw a 1.8%, a faster pace compared to 0.8% seen in the 1Q14. (Please refer to Economic Viewpoint for further comments)

CA Surplus Narrowed To RM16.0b. Strong exports continue to keep the current account (CA) balance in a surplus of RM16.0b in the 2Q14. However, the surplus narrowed from RM19.8b recorded in the 1Q14, due to stronger imports and higher deficit in the services account. Meanwhile, thanks to a reversal in portfolio investment and smaller outflow of FDI, the capital account deficit narrowed to RM11.8b from RM37.6b. (Please refer to Economic Viewpoint for further comments)

Asia

Hong Kong Cuts 2014 Growth Forecast After Unexpected Contraction. Hong Kong cut its economic growth forecast for the year after an unexpected contraction in the second quarter as a slowdown in China crimped the purchases of luxury items and weighed on local sentiment. The economy is forecast to expand 2% to 3%, the government said in a statement yesterday, compared with its February prediction of 3% to 4%. Gross domestic product fell 0.1% in the second quarter from the prior three months, missing the median estimate of 10 analysts surveyed by Bloomberg News for 0.4% growth. (Bloomberg)

USA

Broad Gain In U.S. Factory Production Signals Strength. Factories in July were the busiest in five months as cars rolled off U.S. assembly lines at the fastest rate in 14 years and a stronger economy encouraged American companies to invest in equipment. The 1% gain at manufacturers followed a 0.3% increase in the prior month that was bigger than initially estimated, the Federal Reserve said today in Washington. Total industrial production, which also includes mines and utilities, advanced 0.4% for a second month. Another report showed a record cross-border investment outflow from the U.S. in June as foreign investors reduced their holdings of government debt. (Bloomberg)

Producer Prices Gain, But Falling Energy Costs Check Rise. U.S. producer prices rose marginally in July as a decline in the cost of energy goods offset higher food prices, pointing to a moderation of inflation pressures at the factory gate. The Labor Department said on Friday its producer price index for final demand edged up 0.1% after a 0.4% rise in June. The increase was in line with economists' expectations. Producer inflation data has been volatile since the government revamped the PPI series at the start of the year to include services and construction. (Reuters)

Consumer Sentiment In U.S. Fell In August To Nine-Month Low. American consumer confidence unexpectedly declined in August to a nine-month low, repressed by gloomy wage perceptions. The Thomson Reuters/University of Michigan preliminary sentiment index dropped to 79.2, the lowest since November, from 81.8 in July, according to data issued today. It was lower than any economist surveyed by Bloomberg projected and represented the biggest negative surprise in a decade. (Bloomberg)

Europe

U.K. Keeps Momentum In Second Quarter With 0.8% GDP Growth. The U.K. economy maintained its momentum in the second quarter as output finally surpassed the level seen before the global financial crisis. Gross domestic product grew an unrevised 0.8% between April and June, the same as in the previous three months, the Office for National Statistics said in London today. That left output 0.2% above its previous peak in the first quarter of 2008. The economy expanded an upwardly revised 3.2% from a year earlier, the most since the final quarter of 2007. (Bloomberg)

Ireland Rating Raised To A- By Fitch On Growing Economy. Ireland’s sovereign credit rating was raised to A- by Fitch Ratings as the country’s economy starts to grow. The rating was increased from BBB+ with a stable outlook, Fitch said in a statement today. “Market financing conditions have steadily improved over the past two years,” Fitch said in the statement. Economic growth will become more balanced “as domestic demand turns positive driven by private consumption and investment,” it said. The yield on Ireland’s benchmark 10-year government bonds fell below 2% for the first time on record today, reaching a low of 1.97%. The spread, or difference, with equivalent German bonds fell to 97 basis points. Irish borrowing costs have tumbled since the height of the country’s financial crisis, when the nation’s government pledged to inject 67.5bil euros into its banking system. (Bloomberg)

Currencies

Ringgit Rises To Nine-Month High. Malaysia’s ringgit climbed to a nine-month high after the economy expanded at the fastest pace in six quarters and current-account data beat estimates. Gross domestic product rose 6.4% in the second quarter from a year earlier, according to data from the central bank today. The ringgit is Asia’s best performer in the past three months. The currency appreciated 0.8% to 3.1537 per dollar in Kuala Lumpur and touched 3.1532 earlier, the strongest since October 31, data compiled by Bloomberg show. It rose 1.7% from August 8, the biggest five-day gain since September 20. The ringgit climbed 2.3% in the past three months. (Bloomberg)

British Pound Notches Sixth Weekly Drop. The pound marked its sixth consecutive weekly drop against the U.S. dollar on Friday, underscoring the British currency’s retreat amid a dovish shift in monetary policy. The pound bought $1.6696 on Friday, up slightly from $1.6688 late Thursday. Nonetheless, that’s down from $1.6796 a week ago, putting the currency right near its 200-day moving average. The dollar bought ¥102.34, down from ¥102.46 late Thursday. The currency pair had climbed as high as ¥102.72 in morning trade. The dollar showed little lasting reaction against the euro. The common currency bought $1.3398, up from $1.3367. The dollar index which measures the currency against a basket of its rivals, was down at 81.436 from 81.579. (Market Watch)

Commodities

Oil Jumps Up After Ukraine Says Hit Russian Armored Force. Brent and U.S. crude futures jumped more than $1 a barrel on Friday on news that Ukraine forces had engaged a Russian armored column on Ukrainian soil. Front-month October Brent crude rose $1.46 to settle at $103.53 a barrel, after retreating from a session high of $103.76. The international benchmark lost 1.7% on the week. The September Brent contract expired on Thursday and fell $2.27 to go off the board at $102.01, the lowest settlement for front-month prices since June 2013. U.S. September crude rose $1.77 to settle at $97.35 a barrel, after hitting $97.41 earlier in the session. U.S. crude posted its fourth straight weekly loss, down 0.6% on the week. (Reuters)

Gold Cuts Losses On Renewed Russian-Ukraine Tensions. Gold prices were slightly lower on Friday, paring losses on safe-haven buying as equity markets slid after Ukraine said its forces had engaged a Russian armored column on Ukrainian soil in what appeared to be a major military escalation. Spot gold was down 0.7% at $1,303.90 an ounce by 2:15 p.m. EDT (1815 GMT). It traded as low as $1,292.40 just before the Ukraine headlines. Among other precious metals, silver was down 1.4% at $19.52 an ounce. Palladium was last up 1.1% to $890.25 an ounce, while platinum dropped 0.4% to $1,450.99. (Reuters)