Global

France, Germany Offer Hope for EU-U.S. Trade Deal. France and Germany on Thursday backed proposed reforms to the way disputes in international commercial accords are settled, raising hopes the European Union may unblock an issue holding up trade negotiations with the United States. Opposition to investment arbitration threatens to derail talks between Europe and the United States on forming the world's largest free-trade zone, as some EU governments say the current system lets companies bully governments and undermines the rule of law. Reacting to a European Commission proposal for a change to the rules that includes setting up a permanent arbitration court, Paris and Berlin said "a revolution" was under way. (Reuters)

World Food Prices Fall to Near 5-Year Low in April. Global food prices fell in April to their lowest since June 2010, as dairy led most commodities down, the United Nations food agency said on Thursday. The U.N. Food and Agriculture Organization's (FAO) price index, which measures monthly changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 171 points in April, 1.2% below its reading in March. High global production, a strong U.S. dollar and cheaper crude oil have helped cap food prices for the past year and the index has been declining since April 2014. There are no major concerns about supply, so external factors are likely to have more influence over price developments in the near future, FAO senior economist Abdolreza Abbassian said. (Reuters)

Malaysia

Bank Negara leaves OPR unchanged. The Overnight Policy Rate (OPR) was left unchanged at 3.25% for the sixth straight Monetary Policy Committee meeting and the third of six scheduled for 2015. Since the last bimonthly meeting, central banks in Australia, South Korea and Thailand have joined most other major central banks in the region in monetary policy easing. While there is pressure from the actions of other central banks for Bank Negara Malaysia to follow suit, our view is the OPR will stay unchanged at the current rate for the rest of 2015. This view is dependent on the performance of the domestic economy in the coming months, more specifically, the effect of GST implementation on domestic demand. (See Economic Viewpoint for further comments)

Surprise Boost to Exports and Trade Balance in March. After two worrying months of declining trade activity, March offers a surprise with total trade up by 3.9% YoY. Exports rose sharply by 25.0% MoM, beating our estimate for a more modest 15.9% MoM increase from the seasonally weak Lunar New Year month, which this year was celebrated in February. As a result, its YoY growth rebounded to 2.3% from -9.7% previously.. Imports in March also increased more than expected, by 20.6% MoM and 5.8% YoY, far more than our estimate of 0.9% YoY which is close to the consensus. The trade balance in March improved to RM7.8b from the previous month’s revised figure of RM4.6b. The trade balance for 1Q15 of RM21.3b was down 18.9% from RM26.3b in 1Q14 on a contraction in exports while import growth stayed flat at just 0.2% YoY. (See Economic Viewpoint for further comments)

USA

Jobless Claims Hover Near 15-Year Low, Boost Growth Outlook. The number of Americans filing new claims for unemployment benefits held near a 15-year low last week in a sign that the labor market was strengthening despite moderate economic growth. Initial claims for state unemployment benefits rose 3,000 to a seasonally adjusted 265,000 for the week ended May 2, the Labor Department said on Thursday. That was well below the increase to 280,000 that economists had forecast. Claims for the prior week were unrevised at 262,000, which was the lowest reading since April 2000. The sustained strength suggests March's sharp step down in job growth was likely an aberration, and could keep the Federal Reserve on track to raise interest rates this year. (Reuters)

Despite March Rise, Credit Card Use at Four-Year Low in First Quarter. Consumers were more wary of using their credit cards in the first quarter than any time in the past four years, the Federal Reserve said Thursday. Credit card debt was down at a 0.3% rate in the first quarter. That’s the lowest since the first quarter of 2011. The drop comes despite a rebound in March. Credit card debt rose by a seasonally adjusted $4.4 billion in March, or at a 5.9% annual rate. This is the largest percentage increase since last July. It follows two straight 3.3% declines. (MarketWatch)

Europe

Strong French Industrial Output Adds to Recovery Hopes. French industrial production was the strongest in four years in the first quarter despite a dip in March, boding well for a nascent recovery in the euro zone's second-biggest economy. Industrial output fell 0.3% in March from February, dragged lower by electricity and gas production amid warm temperatures, the INSEE official statistics agency said on Thursday. Economists expected a flat reading. However, over the whole of the first quarter, production was up 1.4%, the highest rate since the same period of 2011, when the economy was growing at its fastest pace since the internet bubble in early 2000. (Reuters)

German Manufacturing Orders Fall Short. German manufacturing orders rebounded in March, owing to strong domestic demand and solid order flow from other eurozone countries, although it was held back by a collapse in demand from outside the currency bloc. The rise in March fell short of expectations and wasn't sturdy enough to bring the volume of total manufacturing orders back to levels seen at the end of last year, data from the economics ministry showed Thursday. German manufacturing orders, adjusted for seasonal swings and inflation, rose 0.9% on the month in March, partly compensating for the weak order flow at the start of the year. Economists had forecast a 1.1% gain.The volume of bulk orders was above average in March, the ministry said. (MarketWatch)

Currencies

Dollar Rallies against Euro on Lower Bund Yields. The U.S. dollar recovered against the euro on Thursday after German Bund yields retreated from their highs for the year and optimism grew that the April U.S. employment report would show strength after upbeat data on weekly jobless claims. German 10-year Bund yields dipped from a 5-1/2-month high of 0.796% to last trade at 0.598%. The move lower made those yields less attractive compared with 10-year U.S. Treasury yields, which were last at 2.17%, and helped the dollar regain some demand. The dollar index was last up 0.57% at 94.618. Sterling edged higher against the dollar and was on track to post its biggest one-day rise against the euro in over two weeks as Britons voted on Thursday in the most unpredictable election in decades. The recovery in sterling against the euro came after sterling hit a three-month low of 74.82 pence per euro earlier in the session. The euro was last down 0.7% against the dollar at $1.12690. The dollar was last up 0.28% against the yen at 119.800 yen. (Reuters)

Vietnam Devalues Dong for Second Time This Year. Vietnam devalued the dong currency for the second time this year on Thursday to support exports and curb import demand which has left it with a trade deficit. The move had been widely expected after Vietnam recorded a $3 billion trade deficit in the first four months of the year, compared with a surplus of $2 billion in the same period last year. The central bank said it had lowered the mid-point rate for the currency on the interbank market by 1% to 21,673 dong per dollar. Dollar/dong transactions can move in a band of plus or minus 1% around the mid-point, which the central bank sets daily. (Nikkei)

Commodities

Oil Dives 3% on Surging Dollar. Oil prices tumbled 3% on Thursday as a resurgent dollar erased gains from the past two sessions, setting the market up for its first weekly loss in five. Traders and investors also returned their focus to the oversupply in crude and gasoline after Wednesday's euphoria over the first U.S. crude drawdown in months. North Sea Brent crude settled down $2.23, or 3.3%, at $65.54 a barrel. For the week, Brent was headed 1.6% lower, its weekly loss since April 30. U.S. crude settled down $1.99, or 3.3%, at $58.94 a barrel. Gasoline fell 2.3%, its biggest loss in a month, to settle at just over $1.99 a gallon. (Reuters)

Gold Slips for Second Session on Higher Dollar, Bond Yields. Gold extended losses into a second day on Thursday as a firm dollar and early strength in bond yields dented its investment appeal, and weighed also by uncertainty over the timing of a U.S. interest rate increase. Spot gold was down 0.8% at $1,182.31 an ounce by 1814 GMT, holding below the key $1,200 level for a fifth day. Gold has been trading in a relatively narrow trading range of around $80 an ounce between $1,142 and $1,224 since mid-February. Bond yields in Europe and the United States have been rising as deflation fears ease on recovering oil prices and in anticipation of an interest rate increase by the U.S. Federal Reserve later this year. As gold pays no interest, the rise in returns from U.S. bonds and other markets is seen as negative for the metal. Silver fell 1.3% to $16.29 an ounce. Platinum dropped 1.1% to $1,129 an ounce, while palladium was down 1.3% at $779 an ounce. (Reuters)