Malaysia

1MDB Debt to be Cut by RM16 Billion. A deal with Abu Dhabi’s International Petroleum Investment Company (IPIC) and its unit, Aabar Investments will see 1Malaysia Development Bhd (1MDB) debt reduce by approximately RM3.5 billion in less than a week from now. And, it is understood that additional transactions, details of which will be finalised in the coming weeks, will further reduce 1MDB's debt by between RM12.0 billion and RM12.5 billion. In exchange, 1MDB will provide IPIC and Aabar with a number of financial assets, including units that are held in the company's BSI Singapore account. The annoucement that 1MDB has entered into a binding agreement with IPIC and Aabar was made by second Finance Minister Datuk Seri Ahmad Husni Hanadzlah on Friday. Earlier in the day, he presented a plan for the corporate rationalisation of 1MDB to the cabinet involving the winding up of 1MDB and the setting up of three standalone operating companies. (Bernama)

Asia

GDP Grows by 7.3 % but Fails to Overtake China. India’s economy grew by 7.3 per cent during 2014-2015, the first financial year presided over by the Modi government, failing to overtake China as the world’s fastest growing major economy. The Central Statistics Office on Friday revised downwards the growth figure from its earlier advance estimate of 7.4 per cent. Capital formation continued to be lower at 28.7 per cent of GDP against 29.7 per cent during 2013-14. Gross fixed capital formation, a barometer for investments, slowed for the second straight year. Improving significantly, however, the manufacturing sector grew by 7.1 per cent against the 2013-14 growth of 5.3 per cent. (The Hindu)

Japan Data Show Spending, Factory Output Muted. Japanese data on Friday showed a mixed outlook for the world's third-largest economy. Japan's jobless rate dropped to an 18-year low in April, but industrial production, inflation and household spending were muted as consumers kept their purse strings tight. The unemployment rate was 3.3% in April after firms stepped up hiring. However, the rising competition for labor is having a limited impact on wages. Factory output rose a seasonally adjusted 1.0% from April, and is projected to grow only 0.5% in May before falling 0.5% in June. Household incomes rose 2% from the year before, but their spending fell 1.3% from a year earlier and 5.5% from March. (AP)

South Korea May PMI Contracts for Third Month. South Korea's manufacturing activity contracted for a third consecutive month in May and fell to its lowest level since mid-2013, a private survey showed on Monday, casting further shadows on the country's economic recovery. The HSBC/Markit purchasing managers' index (PMI) of South Korea's manufacturing sector slid to a seasonally adjusted 47.8 in May from 48.8 in April, Markit Economics said in a statement. The May reading was the lowest since the index stood at 47.5 in August 2013. A reading below 50 means activity shrank during the month, and the index last stood above the neutral line in February. (Reuters)

Americas

U.S. Economy Contracts in First Quarter. The U.S. economy contracted in the first quarter as it buckled under the weight of unusually heavy snowfalls, a resurgent dollar and disruptions at West Coast ports, but activity already has rebounded modestly. The government on Friday slashed its gross domestic product estimate to show GDP shrinking at a 0.7% annual rate instead of the 0.2% growth pace it estimated last month. A larger trade deficit and a smaller accumulation of inventories by businesses than previously thought accounted for much of the downward revision. There was also a modest downward revision to consumer spending. With growth estimates for the second quarter currently around 2%, the economy appears poised for its worst first-half performance since 2011. (Reuters)

U.S. Consumer Sentiment Drops in May. A weak U.S. economy pulled down consumer sentiment in May. The University of Michigan says its index of consumer sentiment dropped to 90.7 from 95.9 in April. The May reading was the lowest since November. Consumers of all ages and income levels were gloomier this month. And they were less confident both about current economic conditions and the future. But Richard Curtin, chief economist of the surveys, noted that the index has averaged 94.6 the first five months of 2015, highest since 2004. (AP)

Brazil GDP Shrinks in First Quarter. Brazil’s economy shrank in the first quarter, a bad start to the year for President Dilma Rousseff, who is under pressure to cut spending and raise taxes even as a recession looms. The contraction, 0.2% in the first quarter from the last quarter of 2014, was less than the 0.5% forecast by economists. The better-than-expected result is little consolation for Ms. Rousseff, who faces a year of weak economic growth and a likely recession amid high interest rates, high inflation, tax increases and unpopular budget cuts. Brazil’s gross domestic product shrank 1.6% in the quarter from the same period a year earlier. Ms. Rousseff’s government last week said it would cut 69.9 billion reais ($22 billion) in spending already budgeted for this year. (The Wall Street Journal)

Europe

Switzerland’s Economy Shrinks, Squeezed by Strong Franc. Switzerland’s economy shrank in the first quarter after the central bank’s repeal of its cap for the Swiss franc in January sent the currency soaring, hitting foreign demand for the country’s pharmaceutical and machinery products. Gross domestic product in the three months through March fell 0.2% from the previous quarter and was 1.1% higher from the same period last year, the Federal Department of Economic

Affairs, Education and Research said. The result was below economists’ expectations for a quarterly contraction of 0.1% and annual expansion of 1.6%. (The Wall Street Journal)

Eurozone Private-Sector Lending Flat in April. Lending to the private sector in the eurozone stabilized last month after improving steadily in late 2014 and early this year, according to data released Friday from the European Central Bank. Loans to eurozone households and businesses were flat on an annual basis in April, the ECB data showed, after growing by 0.1% in March. The ECB’s broad measure of money growth, M3, grew by 5.3% year-over-year, after increasing by 4.6% in March, an indication that the ECB’s €60 billion ($65.5 billion) a month bond purchase program is raising the bloc’s money supply even if those funds aren’t yet being fully channeled into new lending and investment. (The Wall Street Journal)

Currencies

Dollar Ends Winning Month Mixed. The dollar was mixed on Friday with month-end selling after a recent rally, as traders saw little in weak first-quarter U.S. gross domestic product data to discourage bets the Federal Reserve will start raising interest rates in 2015. The dollar index traded tightly and was last off 0.10%, on track for a rise for May. That would extend a string begun last July of nearly uninterrupted monthly gains for the index of six major currencies traded against the greenback. The dollar was off 0.40% at $1.0989 against the euro, which was benefiting from hopes a deal may soon be reached between Greece and its creditors. Traders cited a warning from Japanese Finance Minister Taro Aso as a factor behind the dollar's move away from Thursday's high of 124.46 yen. That was a 12.5 year peak for the dollar which was last trading up 0.10% at 124. The dollar rose 0.05% against the Canadian dollar, which was stung by data showing the country's economy shrank in the first quarter. (Reuters)

Commodities

Oil Leaps 5% as Dollar Rally Stalls. Crude oil prices jumped almost 5% on Friday, their biggest rally in 1.5 months, as a steady U.S. dollar and a bigger than expected drop in U.S. oil rigs in operation set off a renewed rush of bullish bets. U.S. crude rose by as much as $4 a barrel, locking in a record 11th weekly gain that has been propelled both by declining domestic oil inventories and rapidly shifting sentiment ahead of next week's OPEC meeting. Oil bulls were also enthused by Friday's rig count data from Baker Hughes, which showed U.S. drillers again reducing the number of rigs in operation this week despite speculation that they would add more. Brent crude settled at $65.56 a barrel, up $2.98, or 4.8%, on the day. It was flat on the week, while for the month, it fell 2%. U.S. crude ended at $60.30, up $2.62, or 4.5%, on the day, and up about 1% on both the week and month. (Reuters)

Gold Edges Up on Softer Dollar. Gold edged up on Friday from the previous day's 2.5-week low, supported by a softer dollar and uncertainty over Greece's debt talks. The prospect of higher rates, which would boost the opportunity cost of holding non-yielding gold while lifting the dollar, kept the metal on track for a second weekly drop. Spot gold was up 0.3% at $1,190.70 an ounce at 1833 GMT, on track to close May up 0.6%, the second straight small monthly increase. Among other precious metals, silver was up 0.2% at $16.70 an ounce. Platinum was down 0.3% at $1,109.74 and palladium was down 1% at $774.98. (Reuters)