Malaysia

Malaysia on Foreign Investors' Radar. Global financial services firm JP Morgan said foreign investors are continuing to pursue opportunities in the Malaysian market. Managing Director and Senior Country Officer for Malaysia Steve Clayton said the current low interest rates and high liquidity offer good yield potentials. "We're optimistic of the opportunities here. We're also beginning to see more foreigners coming," he said at press conference here. He said investors are keen to look at local companies' fundamentals rather than at other issues such as the country's debt. Clayton pointed out that Standard and Poor's Rating Services affirmed its "A-/A-2" foreign currency and 'A/A-1' local currency sovereign credit ratings on Malaysia in February. Earlier, Moody's Investors Service affirmed the government bond and issuer ratings of the Malaysian government at A3 early this year, with the outlook remaining positive. Only Fitch Ratings has a negative outlook on Malaysia, but the agency has also downgraded its outlook on Japan, he said. (Bernama)

Asia-Pacific

Indonesian Economy Shrinks a Second Quarter. Indonesia’s economy unexpectedly shrank for a second straight quarter as exports and government spending dropped, underscoring the challenge for President Joko Widodo as he seeks to reinvigorate growth. GDP contracted 0.18% in the three months ended March 31 from the previous quarter, the statistics bureau said in Jakarta on Tuesday. That compares with the median estimate of a 0.25% expansion in a survey of 10 economists. The economy grew 4.71% from a year earlier, missing most estimates in a separate survey. The quarterly contraction in the first three months was led by a 49% drop in government spending, while exports dropped 6%, the statistics office said. The agency cited slowing growth in China and Singapore, as well as weak crude oil prices. (Bloomberg)

Australia Cuts Rates to Record 2%. Australia cut interest rates to a fresh record low and said there are signs of improving household spending, sending the currency and bond yields higher as markets bet policy makers won’t ease further. The central bank lowered the key rate to 2% from 2.25% Tuesday, as predicted by traders and economists. Governor Glenn Stevens said in an accompanying statement “the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand.” While weaker business investment and subdued spending by the government is weighing on the economy, there are signs that low borrowing costs are starting to spur stronger demand from households. Stevens cited a better jobs market and gave no indication the central bank was considering a further easing. (Bloomberg)

Vietnam, South Korea Sign Free Trade Agreement. Vietnam has signed with South Korea a free trade agreement which is expected to boost its exports to the South Korean market, the Vietnamese government said on Tuesday. The signing in Hanoi concluded two-year talks between the two countries and the agreement is expected to enable their trade to reach $70 billion a year by 2020, the government said in a statement, citing Vietnam's trade minister Vu Huy Hoang. South Korea is the biggest investor in Vietnam, with pledges totaling $38 billion in more than 4,200 projects as of March 2015, based on Vietnam government data. (Reuters)

Hong Kong March Retail Sales Fall 2.9% as Tourism Takes Hit. Hong Kong retail sales fell 2.9% by value in March from a year earlier, underscoring the impact of a drop in mainland Chinese tourists and tighter visa rules on residents from Shenzhen who visit the Asia financial centre. Chinese authorities aim to reduce import taxes on certain unspecified import goods before the end of June to help boost domestic spending at a time when the economy is slowing. For the first quarter of 2015, the value of retail sales fell 2.3% from a year earlier, while the volume of retail sales was virtually unchanged over that period. For March, retail sales fell to HK$38.4 billion ($4.95 billion) but climbed 0.8% by volume. (Reuters)

China Widens Foreign Access to Domestic Bond Market. China has approved HSBC, Morgan Stanley and 30 other foreign institutions to invest in its $5.9tn domestic bond market, a big step towards opening its capital markets to foreign investment. China has significantly expanded foreign access to its stock market in recent years, but liberalisation of the domestic bond market — the world’s third-largest, behind the US and Japan — has proceeded more slowly. Economists say loosening restrictions on bond investment is crucial if China wants to persuade international investors to store their savings in renminbi. Heavyweights such as central banks, sovereign wealth funds, insurers and pension funds have portfolios heavily weighted towards fixed income. (Financial Times)

USA

Trade Gap in U.S. Swells to Six-Year High as Imports Surge. The U.S. trade deficit widened in March to the highest level in more than six years, fuelled by a record surge in imports as commercial activity resumed at West Coast ports following a resolution to labour disputes. The gap increased 43.1%, the biggest jump in 18 years, to $51.4 billion, the largest since October 2008, the Commerce Department reported Tuesday in Washington. The shortfall exceeded the highest estimate of 70 economists. Purchases of foreign-produced foods, capital goods and consumer products all set records, while demand for petroleum dropped. (Bloomberg)

Pickup in Service Industries Points to U.S. Growth Rebound. The biggest part of the U.S. economy awoke from its first-quarter torpor as service industries from real estate to transportation and banking picked up in April. The Institute for Supply Management’s non-manufacturing index rose to 57.8, the highest since November, from 56.5 in March, the Tempe,

Arizona-based group’s report showed Tuesday. Readings above 50 signal expansion. Services, which constitute about 90% of the economy, are benefiting from a plunge in oil prices that is giving consumers extra cash to spend at retailers, restaurants and movie theatres even as it heaps damage on factories. This bodes well for a pickup in growth and employment, which could use the boost. (Bloomberg)

Europe

EU Lifts Eurozone Growth Forecast. European Union economists said cheaper oil and central bank stimulus should help deliver faster growth in the region this year, but questioned whether Europe's economy would continue to expand at these rates over the longer term. The forecasts from the European Commission, the EU's executive arm, said the scars of the region's debt crisis high unemployment, high government and corporate debt burdens, banking system problems and weak investment spending will likely weigh on the region's growth for years to come. The forecasts published on Tuesday also showed the diverging fortunes of the countries that suffered most during the eurozone debt crisis. The Spanish and Irish economies are expected to be among the fastest-growing in the bloc, while Greece's growth forecasts were slashed. Economists at the European Commission, the EU's executive arm, forecast that gross domestic product in the 19-nation eurozone should grow at 1.5%, up from their previous forecast in February of 1.3%. They forecast growth in the 28-nation EU at 1.8%, up from 1.7% in February. The commission raised its forecast for Germany to 1.9% from 1.5%. German domestic consumption will drive growth, the commission said, buoyed by the strong job market, immigration and low interest rates. (MarketWatch)

Currencies

Dollar Falters as Mixed U.S. Data Clouds Rate Outlook. The dollar skidded from three-week highs against the yen and one-week peaks against the euro as a mixed batch of U.S. economic data added to uncertainty about the pace of future interest rate increases. A better-than-expected report on the U.S. services sector for April was offset by a wider-than-anticipated trade deficit. The dollar initially rallied on the service sector survey, but came crashing back down. In late trading, the dollar index fell 0.4% to 95.072. The euro recovered from one-week lows to trade 0.5% higher at $1.1195, shrugging off a report that said the International Monetary Fund may cut funding to Greece. Against the yen, the dollar fell 0.3% to 119.82 yen, after earlier touching three-week highs. (Reuters)

Commodities

WTI Ends above $60 for First Time in Nearly 5 Months. Oil futures rallied Tuesday, with the U.S. benchmark settling above $60 a barrel for the first time in nearly five months as protests at a Libyan oil port fed concerns over supplies. June U.S. crude tacked on $1.47, or 2.5%, to settle at $60.40 a barrel on the New York Mercantile Exchange. Tracking the most-active contracts, prices haven’t closed above $60 or settled at a level that high since Dec 10. Meanwhile, Brent crude for June delivery on London’s ICE Futures exchange surged $1.07, or 1.6%, to $67.52 a barrel. (MarketWatch)

Gold Up as Dollar Turns Lower. Gold rose on Tuesday as the dollar turned lower and global shares fell ahead of U.S. non-farm payroll data later in the week that could give clues as to when the Federal Reserve will raise interest rates. Spot gold fell initially then firmed, and was up 0.4% at $1,192.80 an ounce by 1820 GMT. U.S. gold futures for June delivery settled up $6.40 an ounce at $1,193.20. Silver rose 0.8% to $16.52 an ounce after climbing to a four-week high on Monday. Platinum rose 0.2% to $1,142.49 an ounce, while palladium gained 1.5% to $792.05 an ounce, the highest level since March. (Reuters)