Global

OECD Says Signs of U.S. Economy Flagging, China Loses More Steam. Economic growth appears to be flagging in the United States and continues to slow in China, while France and Italy are outperforming as the euro zone economy recovers, a monthly OECD measure showed on Tuesday. The composite leading indicators (CLIs), designed to anticipate economic turning points, signalled stable growth momentum in the OECD area as well as Japan, Germany, Britain and India, the OECD said. "In the euro area, growth momentum continues to strengthen, particularly in France and Italy. Signs of easing growth momentum are emerging in the United States, although these may reflect transitory factors.” (Reuters)

Malaysia

People’s Priorities Main Focus of 11th Malaysia Plan. The priorities of the people especially with regard to the cost of living, education, security, public transportation and rural infrastructure remain the focus of the 11th Malaysia Plan (11MP), says Prime Minister Datuk Seri Najib Tun Razak. Najib, who is scheduled to table the 11MP in the Dewan Rakyat on May 21, said that there would be a special focus on technical and vocational education and training: "Our ambition, which will be reinforced by the Education Blue Print, is to produce well-rounded and balanced graduates who meet the needs of industry.” He said a 'People's Economy' was not complete without the support of the private sector in raising incomes, generating employment opportunities and facilitating career advancement and development. He also expressed his intention to gradually reduce corporate tax to boost Malaysia's competitiveness. (Bernama)

New Indicator Hints at Better-Than-Expected 1Q15 GDP Growth. A new quarterly index puts 1Q15 growth in service sector production at 7.1% YoY, up from 6.8% in 4Q14 and an average of 6.5% for 2014 led by Distributive Trade, Wholesale Trade, Retail Trade and Professional Services sub-sectors. These sub-sectors benefitted from an increase in private consumption in 1Q15 as consumers brought forward purchases ahead of the April implementation of the Goods and Services Tax (GST) and businesses upgrade to a new accounting and payment system. (See Economic Viewpoint for further comments)

Asia

Japan Puts Focus on Growth to Repair Finances. Japan's government shifted focus on Tuesday to boosting economic growth and tax revenues to repair public finances, increasing concerns the government will shy away from painful and unpopular spending cuts. The change in policy came after a meeting of the government's top advisory panel, where private-sector members said the government should aim to keep gross domestic product growth above 2% in real terms and 3% in nominal terms."Without economic revival, there will be no fiscal consolidation," said Economics Minister Akira Amari. "We've tried across-the-board spending cuts before, but in the end it didn't work. This time we cannot fail." (Reuters)

Japan’s Current-Account Surplus Widens to Biggest Since 2008. Japan’s current-account surplus widened to the most since 2008 in March, helped by an improvement in the trade balance and increased income from overseas. Japan had a 2.8 trillion yen ($23 billion) excess in its broadest measure of trade, the finance ministry said on Wednesday. The result was wider than a median estimate of 2.1 trillion yen in a survey of economists. A cheaper energy import bill, combined with an influx of tourists attracted by a weaker yen and increasing income from investments abroad by Japanese companies are helping to increase the surplus. (Bloomberg)

BOJ Seeks to Boost Reserves as Record Easing Adds Risk. Japan’s central bank is seeking approval to retain a quarter of its profit as capital, increasing a cushion against potential losses on a balance sheet that’s growing at a record pace. The Bank of Japan has asked the Ministry of Finance for permission to boost the proportion of its earnings it can put into its legal reserve to 25% for the 12 months that ended March 31, from 20% in the previous fiscal year, it said in a statement Tuesday. Increased reserves would help absorb potential losses as Governor Haruhiko Kuroda pursues unprecedented purchases of government bonds and assets linked to stocks and real estate. (Bloomberg)

India's Inflation Cools, Factory Output Weakens. India's inflation rate fell to its lowest level in four months and growth in industrial output slowed, official data showed Tuesday, increasing calls for an interest rate cut next month. Consumer inflation eased to 4.87 per cent in April from a year earlier, the slowest pace since December, on the back of lower food costs, and down from 5.25 per cent in March, the data showed. The latest figure was close to the 4.9 per cent figure predicted by economists. Production at India's factories, mines and utilities, meanwhile, grew just 2.1 per cent in March from a year ago, lower than the 3 per cent forecast. Output growth was also sharply lower than the nine-month high of 5 per cent the month before. (AFP)

USA

Wage Growth May Be On Tap as More Americans Quit Jobs. Americans are becoming more apt to quit their jobs, a government report showed on Tuesday, a sign that a stronger labor market and falling unemployment rate could result in healthier wage growth and inflation. The three-month quit rate for non-government jobs rose to 6.6%, the report showed, the highest since the second quarter of 2008 and up from 6.5% in the final quarter of 2014. Both wages and inflation tend to follow a rise in the quit rate by a couple of quarters, research from the Chicago Federal Reserve Bank shows. (Reuters)

Europe

U.K. Industrial Output Unexpectedly Rises Most in Six Months. U.K. industrial production rose the most since September as oil and gas extraction surged and manufacturing increased for a second month. Output gained 0.5% in March from the previous month, the Office for National Statistics said in London on Tuesday. Economists had forecast no change. In the first quarter, industrial output was revised to a 0.1% increase from a 0.1% decline, though the ONS said the impact on GDP would be “minimal.” Manufacturing rose 0.4% in March from February, the ONS said, exceeding the 0.3% survey estimate. Oil and gas extraction surged 4.9%, the most since February 2014. Within manufacturing, the monthly increase was led by pharmaceuticals and a broad category that includes furniture and the repair of ships and aircraft. (Bloomberg)

Greece Taps Reserves to Pay IMF Loan. Greece was forced to tap into an emergency account to make a debt interest payment to the International Monetary Fund (IMF), it has emerged. The government raided its reserves to make the €750m (£538m) payment on Monday, one day ahead of the deadline. It comes after Greek finance minister Yanis Varoufakis warned his country was weeks from running out of cash. Greece is believed to have borrowed €650m from its IMF holding account to meet the debt interest payment. (BBC)

Currencies

Dollar Weakens as Debt Market Shakeout Persists. The euro rose against a broadly weaker dollar in Europe on Tuesday, with gyrations on the bond market undermining the broad story of U.S. currency strength that has dominated the past year on foreign exchange markets. The latest move in a broad repricing of risk in debt markets, which analysts are still struggling to explain, was a rise in longer-dated U.S. yields overnight. That should have benefited the dollar, but German Bund yields rose by more and elsewhere there was positive data that helped both sterling and the Australian dollar higher. That all added up to a 0.7% fall in the dollar index. The euro rose almost a full percentage point to $1.1252. The pound rose as high as $1.5710 before retreating to $1.5678, up 0.6% on the day. Against the yen, the dollar dipped less than 0.1% to 119.99 yen. (Reuters)

Commodities

Oil Up 3% in Largest Gain in Three Weeks. Oil rose 3% on Tuesday, the most in three weeks, as a weak dollar lifted commodities denominated in the currency and OPEC raised slightly its forecast for world oil demand growth. Violence in Yemen also boosted crude prices, raising concerns over the security of Middle East supplies. The dollar fell on bond market gyrations, making oil and other commodities priced in the greenback more affordable to holders of the euro and other currencies. North Sea Brent settled up $1.95, or 3%, at $66.86. The last time it rose 3% in a day was on April 23. U.S. crude settled up $1.50, or 2.5%, at $60.75 a barrel. (Reuters)

Gold Up 1% on Weak Dollar, Shares. Gold rose up to 1% on Tuesday as the dollar and European shares suffered from a sell-off in global bond markets, although higher real yields kept prices under $1,200 an ounce. Spot gold touched a session high of $1,196.60 an ounce and was up 0.8% at $1,193.35 by 3:00 p.m. EDT (1900 GMT). The dollar index, which measures the U.S. currency against a basket of major peers, fell 0.5% and helped support gold prices. Silver rose 1.6% to $16.55 an ounce, platinum 0.7% to $1,128.99 an ounce and palladium 0.9% to $784.60 an ounce. (Reuters)