Malaysia

· Fitch Maintains Negative Outlook On Malaysia Sovereigns. Fitch Ratings is maintaining its Negative Outlook on Malaysia’s sovereign ratings. In its 2015 Outlook for Emerging Asian Sovereigns report on Monday, said it said eight of 10 Emerging Asian sovereigns were on Stable Outlook, with two (Malaysia and Mongolia) on Negative Outlook. The ratings agency pointed out its negative outlook for Malaysia, whose A- rating it had affirmed on July 23, “reflects the erosion of its current account surplus amid large public sector deficits and a drop in oil prices”. Fitch said this was in the context of relatively weak credit fundamentals for an ‘A’ range sovereign. “Fitch acknowledges that the government has so far stuck to a path of consolidation for the headline federal deficit set out in July 2013, although the drop in oil prices could delay or derail fiscal consolidation, if sustained. It added the emergence of “twin” pubic and external deficits could affect investor confidence, if it were to occur. (The Star)

Asia

· Fitch: Upward Pressure On Emerging Asia Sovereign Rtgs Weakens. Positive pressure on ratings is ebbing, says Fitch Ratings in its 2015 Outlook for Emerging Asian Sovereigns. This follows a run of upgrades since 2011, the latest being Vietnam, which was raised to 'BB-'/Stable on 3 November 2014, Fitch rating agency said in a statement released Sunday. Eight of 10 Emerging Asian sovereigns are on Stable Outlook, with two (Malaysia and Mongolia) on Negative Outlook. Market volatility in December 2014 could be a foretaste of what is to come in 2015 as the US Federal Reserve moves towards raising interest rates while other major central banks may ease policy further. It was striking that the Emerging Asian markets should have been caught up in turbulence coming from Russia, as the region's direct links with Russia are few. These events show that Emerging Asia remains vulnerable to contagion from events elsewhere. Nonetheless, Fitch expects real GDP in Emerging Asia, excluding China, to expand by about 6% in 2015 and 2016, remaining the world's fastest-growing region. We forecast China's GDP to expand at 6.8% in 2015 and 6.5% in 2016, as the government's bid to rebalance the economy works through. Lower oil prices and faster growth in advanced economies support most Emerging Asian countries, including China. (Reuters)

· Japan Expects Real 1.5% Growth In Fiscal 2015 As Economy Bounces Back. Japan's government expects the economy to grow 1.5% in fiscal 2015 after adjustments for price moves, a slight upgrade from its previous forecast, due to an expected acceleration in consumer spending. The government forecast overall consumer prices to rise only 1.4% in fiscal 2015 in a sign of the difficulty the Bank of Japan faces in meeting its 2% inflation target. Prime Minister Shinzo Abe's cabinet will use these forecasts to guide its fiscal and economic policies as the government tries to accelerate growth after a surprise recession last year. (Reuters)

· Abe Says Japan Can Meet Deficit-Halving Goal With FY2015/16 Budget. Prime Minister Shinzo Abe said on Monday Japan is on course to meet his promise of halving the primary budget deficit - excluding new bond sales and debt servicing - in the next fiscal year. "I'd like to have this budget enacted by parliament as soon as possible so that the fruit of Abenomics can spread through regions," Abe was quoted by Kyodo news agency as saying. Finance Minister Taro Aso confirmed that Japan's annual general-account budget would hit a record 96.34 trillion yen ($815.40b) for next fiscal year, up 460b yen from the current year, reflecting rising welfare costs. He said tax revenue would reach 54.53 trillion yen, up 4.53 trillion yen from this fiscal year and hitting a 24-year high. That will allow the government to trim new bond issuance by 4.39 trillion yen from the current fiscal year to 36.86 trillion yen, below 40 trillion yen for the first time in six years. (Reuters)

· S. Korea Exports Hit Record High In 2014. South Korea enjoyed record exports last year, data showed Friday, despite slow growth in key market China and a sluggish recovery in Europe. For the whole of 2014, overseas shipments grew 2.4% to US$573.1bil and imports rose 2% to US$525.70bil, the trade ministry said. As a result, South Korea’s trade surplus widened to a record high of US$47.41bil, it said. The trade balance has been in the black since February 2012. In December alone, exports rose 3.7% year on year to US$49.74bil, while imports fell 0.9% to US$43.96bil. Trade surplus widened to US$5.78bil in December from the previous month’s US$5.51bil. (AFP)

· China's Car Sales Growth Halves In 2014. Growth in vehicle sales in the world's largest car market, China, halved last year as the country's economic expansion slowed. The China Association of Automobile Manufacturers (CAAM) said that sales rose by 6.9% in 2014, compared with growth of 13.9% a year earlier. The industry body also expects the market to expand by 7% this year, in line with China's economic growth. Global carmakers have been grappling with slowing sales in China. (BBC)

· Indian Inflation Quickens Less Than Predicted As Output Grows. Indian retail inflation accelerated less than economists predicted and factory output grew before central bank Governor Raghuram Rajan reviews interest rates next month and the government presents its annual budget. Consumer prices rose 5% in December from a year earlier, the Statistics Ministry in New Delhi said yesterday. That compared with November’s 4.38% that was the slowest since the index was created in January 2012. The median of 40 estimates in a Bloomberg survey of economists had been for a 5.35% gain. Industrial production rose 3.8% in November. That compared with a 2.3% predicted gain, after output shrank 4.2% in the previous month. (Bloomberg)

U.S.A.

· Treasuries Rally Sends 10-Year Yield to 2013 Low on Oil Weakness. Treasuries rose, pushing 10-year note yields to a 2013 low, as tumbling oil prices crimp the outlook for inflation and fueled speculation the Federal Reserve may delay an interest-rate increase. U.S. debt extended gains after the auction of $24b of three-year notes produced a lower-than forecast yield. Fed Bank of Atlanta President Dennis Lockhart said policy makers should be “patient” in raising rates. West Texas Intermediate crude oil will weaken to $41 a barrel in three months, Goldman Sachs Group Inc. forecast. The 10-year yield dropped four basis points, or 0.04 percentage point, to 1.91% at 4:59 p.m. New York time, according to Bloomberg Bond Trader data, the lowest on a closing basis since May 2013. The 2.25% note due November 2024 rose 11/32 or $3.44 per $1,000 face amount to 103 1/32. The 30-year bond yield dropped three basis points to 2.50%. The record low of 2.44% was reached in July 2012. (Bloomberg)

Europe

· OECD Indicator Signals Stable Growth; Germany Flagging. International economic growth is set to remain stable across the OECD area as a whole and in the euro zone, despite signs that Germany, Europe's largest economy, is losing steam, the Organisation for Economic Co-operation and Development said. France, the second-biggest euro zone economy, saw marginal improvement, with the OECD's index of growth rising from 100.2 to 100.3. It dipped in Germany to 99.5 from 99.6 and in Italy to 101.0 from 101.1. For the euro zone as a whole the index remained stable at 100.6. In the broader OECD area, it nudged up to 100.5 in the latest monthly publication from 100.4 previously. China's reading ticked up to 99.3 from 99.2 and India's to 99.5 from 99.3. The U.S. reading remained at 100.4 and Japan held steady at 99.8 Britain's reading dipped to 100.3 from 100.4 and Russia's dipped more notably, to 99.8 from 100.2. (Reuters)

· Political Uncertainty Sours Greek Economic Mood Ahead Of Election. Greeks turned more pessimistic about their economic prospects in December, with a core gauge of business sentiment falling to its lowest level since April 2014 ahead of a snap election on Jan. 25. The radical leftist Syriza party is leading opinion polls, triggering fears of a standoff with EU/IMF lenders that could result in Greece leaving the euro zone. Syriza has pledged to cancel austerity policies imposed as part of Greece's 240b euro bailout, and try to negotiate debt relief. The Foundation for Economic and Industrial Research (IOBE)said its overall sentiment index for the Greek economy fell to 98.9 points in December from 102.7 in November. The index is based on consumer confidence gauges and readings of the business outlook in sectors including construction, manufacturing industry, retail trade and services. (Reuters)

Currencies

· Euro Slumps Against U.S. Dollar As Investors Bet On QE. The euro slumped to a near nine-year low against the dollar on Monday after a report that the European Central Bank is moving closer to announcing a full-scale quantitative-easing program. The shared currency traded as low as $1.1785, but eventually recovered to $1.1837, where it traded Friday afternoon. Last Thursday, the euro dropped to a low of $1.175, its lowest since December 2005. In other currencies, the ICE dollar index a measure of the greenback’s strength against a trade-weighted basket of six rival currencies was flat at 91.9630, compared with 91.9450 on Friday, when the gauge fell by 0.46%.After rising earlier in the session, the dollar fell against the yen to ¥118.2840, compared to ¥118.50 late Friday. The pound fell to $1.5112 from $1.5159. (Marketwatch)

Commodities

· Malaysian Palm Oil Up On Prospect Of Tight Supplies. Malaysian palm oil futures rose on Monday to hover near sixmonth highs on concerns over tight supplies in the No.2 grower after industry data revealed that end-stocks have dropped to their lowest in five months. Official data from industry regulator the Malaysian Palm Oil Board, released after the midday break, showed that December inventories fell 11.6% to 2.01 million tonnes, a bigger drop than the 2.02 million tonnes estimated by the market. The benchmark March contract rose 0.6% to 2,361 ringgit ($662) per tonne by Monday's close. Total traded volume stood at 42,977 lots of 25 tonnes, above the usual 35,000 lots. (Reuters)

· Brent Crude Oil Price Falls To Six-Year Low. The price of Brent crude oil has fallen further below $50 to a six-year low. The price of a barrel of the North Sea benchmark dropped by 5.5% to $47.36, its lowest level since early 2009. US crude oil was also at its lowest level since that time, down by 5% to $45.90 a barrel. The cost of petrol in the UK is being cut in response to the recent falls, with one Birmingham garage selling petrol at 99p a litre. Asda said on Monday it would be cutting its forecourt price by a further 2p a litre to 103.7p. Diesel will be 110.7p. (BBC)

· Gold Jumps 1 Pct To One-Month High As Shares, Oil Fall. Gold climbed 1% to a one-month high on Monday as the dollar pared gains and shares turned negative, with investor sentiment boosted by shifting expectations on when U.S. interest rates may rise. Spot gold climbed to its highest since Dec. 10 at $1,235.90 in Asian trade and was up 1% at $1,233.96 an ounce by 2:56 p.m. EST (1956 GMT). Silver was up 0.4% at $16.56 an ounce, platinum rose 1.1% to $1,238.00 an ounce and palladium gained 1.1% to $809.00 an ounce. (Reuters)