Global

Europe, Mexico to Seek New Trade Pact to Deepen North American Ties. The European Union and Mexico will launch negotiations toward a new free-trade agreement later this year, as Europe seeks to tie its economy closer to North America following a deal with Canada and efforts to sign an accord with the United States. Building on a pact with Mexico from 2000, the European Union hopes to create a transatlantic free-trade zone and help set the global rules of commerce before China does. Mexico is jumping ahead of Brazil, whose talks toward a similar deal with the European Union have stalled. "We are ready to commit to a highly ambitious deal," EU Trade Commissioner Cecilia Malmstrom told a forum in Brussels alongside Mexican Economy Minister Ildefonso Guajardo. "I will ask for a mandate to launch negotiations this fall," she said. (Reuters)

Malaysia

Industrial Production Posts Strong Rebound from Seasonal Low. Industrial production rebounded in March from a seasonally weak Lunar New Year month, which fell in February this year. The jump in the main Industrial Production Index (IPI) of 6.9% YoY was more than expected by consensus and our estimates which called for an increase of 4.5% and 4.4% respectively. Manufacturing output, accounting for about two-thirds of the IPI, also performed much better than expected. We estimated growth of 3.5% YoY but actual March numbers for manufacturing came in higher at 6.3% led by double-digit gains in Electrical & Electronic (E&E) Products. Mining output, the next most important contributor to the IPI, recorded an eighth consecutive month of YoY growth on higher production from new offshore fields. For the first quarter or 1Q15, the IPI grew by 6.4% YoY. Manufacturing output grew by 5.6% YoY. (See Economic Viewpoint for more comments)

Bank Negara Reserves at RM392.4 Billion as of 30 April 2015. The international reserves of Bank Negara Malaysia amounted to RM392.4 billion (equivalent to US$105.8 billion) as at 30 April 2015 compared to RM391.4 billion reported as of 15 April 2015. The reserves position is sufficient to finance 8.0 months of retained imports and is 1.1 times the short-term external debt. (BNM)

Asia

China's New-Auto Sales Drop for First Time in Over 2 Years. Auto sales in China dropped 0.5% on the year to 1,994,500 in April, the China Association of Automobile Manufacturers said Monday. This marks the first decline since a 1.8% slip in September 2012 linked to anti-Japan demonstrationsexcluding the January-February period, when sales fluctuate because of the Chinese New Year holidays. China's new-car market expanded rapidly into mid-2014, then lost momentum as signs of an economic slowdown surfaced. In March, sales increased by just 3.3% on the year. With major automakers such as Volkswagen from Germany and General Motors of the U.S. raising capacity in China, concern over a supply glut is growing. (Nikkei)

South Korea to Announce Measures to Help Exports in June. South Korea is planning to announce new measures in June to help boost exports, Finance Minister Choi Kyung-hwan told reporters during a luncheon meeting on Monday, as exports in Asia's fourth-largest economy have lagged throughout this year. "Our exports are changing due to shifts in China and a weakening Japanese yen," said Choi in comments provided by the ministry.. China is South Korea's biggest export market. South Korea's trade ministry has said the sluggish economy in China and heightened efforts there to produce goods that were once exported from countries like South Korea have dented shipments. South Korean exports in April posted their worst fall in two years. (Reuters)

Europe

IMF Says German Economy Could Grow More than 1.6% This Year. Germany's economy could grow more in 2015 than the 1.6% the International Monetary Fund forecast in April if lower energy prices and the European Central Bank's bond-buying scheme feed through more than expected. Enrica Detragiache, assistant director of the IMF's European department, told a news conference in Berlin that the IMF would, however, stick to its German growth forecast for the time being. Last month Berlin raised its forecasts for 2015 and 2016 to 1.8% due to new jobs, cheap oil and the weak euro. The IMF said there were still risks such as weaker than forecast growth in Germany's trade partners or an escalation in the euro zone's troubles. Private consumption will be the main growth driver in 2015 as workers benefit from robust wage increases while net exports will also provide support, the IMF said. (Reuters)

Bank of England Keeps Rates Steady before Inflation Update. The Bank of England kept interest rates steady at a record-low 0.5% on Monday, judging that the outlook for prices and wages is still too weak for it to raise the cost of borrowing despite solid growth prospects. The Bank issued no statement but Governor Mark Carney will explain more on Wednesday, when he presents a quarterly update to the central bank's forecasts for growth and inflation. Most economists do not expect the Bank to raise interest rates which have been unchanged for more than six years until early 2016. (Reuters)

Greece Orders Handover of 750 Million Euros to IMF. Greece's cash-strapped government has begun the transfer of €750m (US$834m) in debt interest to the International Monetary Fund. The move was carried out as eurozone finance ministers met in Brussels in a bid to unlock the final €7.2bn tranche of Greece's €240bn EU/IMF bailout. Ministers said Greece had made "progress" but more work was needed. Greek Finance Minister Yanis Varoufakis said the country faced a cash crisis within a "couple of weeks". "The liquidity issue is a terribly urgent issue. It's common knowledge, let's not beat around the bush," he told reporters after the talks. The left-led Athens government has until the end of June to reach a reform deal with its international creditors. Its finances are running so low that it has had to ask public bodies for help. (BBC)

Currencies

Dollar Gains against Euro on Greece Worries. The U.S. dollar rose against the euro on Monday on renewed worries over a Greek exit from the eurozone, while the New Zealand dollar hit more than seven-week lows against the greenback on speculation the country's central bank might cut interest rates. Finance ministers of the euro zone welcomed progress in negotiations between Greece and its creditors on a cash-for-reform deal but said more work is needed to bridge differences holding up a comprehensive agreement. The Eurogroup met Monday to discuss Greece. The dollar benefited from the jitters over Greece and notched its third straight session of gains against the euro. The euro was last down 0.5% against the dollar at $1.11535. The dollar was up 0.4% against the Swiss franc at 0.93440 franc, and was up 0.2% against the yen at 120.130 yen. The dollar index was up 0.3% at 95.046. (Reuters)

Commodities

Oil Slips Lower amid Debate on U.S. Shale Oil Recovery. Oil edged lower on Monday on signs that a multi-week rally was encouraging a rejuvenation in already bloated U.S. shale supplies, even as the government expected less output in June from the fastest-growing fields. Rigs for drilling oil in the voluminous Permian shale basin rose last week for the first time this year after months of cutbacks. Still, the U.S. Energy Information Administration expects output from the fastest-growing U.S. shale plays to drop 71,000 barrels per day in June to 4.97 million bpd. U.S. crude futures settled down 14 cents at $59.25 a barrel. Brent crude futures, the more globally referenced benchmark for oil, fell 48 cents to end at $64.91. (Reuters)

Gold Falls as Stronger Dollar Offsets Impact of Mixed U.S. Data. Gold eased on Monday as the impact of a rebounding dollar, bolstered by persistent concern about future Greek debt payments, outweighed U.S. data supporting bets the Federal Reserve will not raise rates until late 2015. Spot gold was down 0.4% at $1,183.10 ounce by 3:05 p.m. EDT (1905 GMT), while U.S. gold settled down 0.5% at $1,183 an ounce. Spot gold has remained below the key $1,200 level for seven sessions straight. Silver fell 1.1% to $16.25 an ounce. Platinum dropped 1.5% to $1,123.04 an ounce, while palladium was down 2.4% at $778.75 an ounce. (Reuters)