Malaysia

MoF Officials and Fitch Meet to Discuss Sovereign Rating. The Ministry of Finance is expected to meet representatives of Fitch Ratings Agency later today to convince them that Malaysia's economy is still sustainable and should be viewed positively, said Secretary General Tan Sri Irwan Serigar Abdullah. He said the agency, which currently rates Malaysia as an A-, had implied a 50% likelihood of a downgrade in the country's credit ratings. "We hope with initiatives on fiscal consolidation and growth emphasis as well as the launch of our Eleventh Malaysia Plan that allocated a total of RM260 billion for development expenditure, it will give positive indicators to the rating agency," he said. (Bernama)

Asia

Rajan Cuts India Rate, Says Next Move Hinges on Monsoon. India’s central bank lowered interest rates for a third time this year and said it’d wait to assess monsoon rains before acting again, an outlook that disappointed investors looking for more cuts to spur weak economic growth. Governor Raghuram Rajan reduced the benchmark repurchase rate to 7.25% from 7.5%, the Reserve Bank of India said in a statement Tuesday. The move, which takes the rate to the lowest since September 2013, was predicted by 33 of 41 economists. While “a conservative strategy would be to wait” for more certainty on how monsoon rains will affect inflation, weak investment means “a more appropriate stance is to front-load a rate cut today and then wait for data that clarify uncertainty,” Rajan said. He also lowered the RBI’s growth forecast and said inflation risks are tilted on the upside. (Bloomberg)

Reserve Bank of Australia Coy on Further Rate Cut after Holding Fire. Australia left its key interest rate unchanged at a record low and was coy on whether further cuts would be needed to boost growth. Central bank Governor Glenn Stevens and his board kept the cash rate at 2% in Sydney Tuesday, as predicted by traders and economists. “Monetary policy needs to be accommodative” as the economy is likely to operate with spare capacity “for some time yet,” Stevens said. Stevens said in the final paragraph of his statement that the Reserve Bank of Australia would use data over the period ahead to determine whether its policy was correctly set to boost growth and keep inflation consistent with its target. (Bloomberg)

Japan Pay Gains Inch Ahead of Living Costs First Time in Two Years. Japanese workers saw their wages increase faster than the cost of living in April for the first time in two years, as the impact of last year’s sales-tax hike faded. Real pay rose 0.1% from a year earlier, the labor ministry said on Tuesday. Overall wages, including overtime and bonuses, climbed 0.9%, the most since December, as base pay rose for a second straight month. Prime Minister Shinzo Abe is prodding businesses to plow more of their near-record cash into salaries and investment. Large companies agreed to an average 2.6% increase in pay in talks with labor unions, a boost that BOJ Governor Haruhiko Kuroda said he expects to see show up from June. (Bloomberg)

Singapore May Factory Activity Expands, Hits Six-Month High. Singapore's manufacturing activity expanded for the first time in six months in May, helped by a pick-up in new orders and production, although the electronics sector contracted for the second straight month. Singapore Institute of Purchasing & Materials Management's Purchasing Managers' index (PMI) rose to 50.2 in May, rising back above the 50 threshold for the first time since November, when it came in at 51.8. (Reuters)

Thai Consumer Prices Fall for Fifth Straight Month in May. Thailand's annual consumer price index declined for a fifth straight month in May, mainly due to lower energy prices, giving the central bank leeway to ease monetary policy further to support the faltering economy. The index, published by the Commerce Ministry, fell a little more than expected by 1.27% in May from a year earlier. A market poll forecast a contraction of 1.12%. The core inflation rate, which strips out food and energy prices, rose 0.94% in May compared to 1.02% in April. (Reuters)

USA

May Auto Sales Race to Strongest Pace in Nearly a Decade. Consumers emboldened by easy-to-get loans and cheap gas pushed U.S. auto sales in May to their strongest pace in nearly a decade. U.S. May auto sales hit 17.79 million on a seasonally adjusted annualized basis, according to Autodata Corp, the highest since summer 2005. Sales of pickup trucks and SUVs in May led the way again, which bodes well for profit margins of the major automakers. Consumers are snapping up trucks and sport utility vehicles as the national price of gasoline averaged $2.75 a gallon, nearly a dollar less than this time last year. GM sales rose 3% in May, while Fiat Chrysler Automobiles' increased 4%. (Reuters)

U.S. Factory Orders Weak in April. New orders for U.S. factory goods fell in April on weak demand for transportation equipment and other goods, suggesting that manufacturing remained constrained by a strong dollar and spending cuts in the energy sector. New orders for manufactured goods slipped 0.4% after increasing 2.2% in March. Factory orders have declined in eight of the last nine months. Economists had forecast orders to be unchanged in April. Excluding the volatile transport component, orders were flat for a second straight month. Manufacturing accounts for about 12% of the U.S. economy. (Reuters)

Europe

Euro-Area Inflation is Back after Deflation Scare. Euro-area consumer prices rose for the first time in six months in May, providing respite for European Central Bank policy makers after a deflation scare drove them to unleash a trillion-euro stimulus program. The 0.3% annual increase exceeded the 0.2% median forecast of economists. Core inflation accelerated to 0.9%, the fastest in nine months, the European Union’s statistics office in Luxembourg said Tuesday. Improving inflation numbers across the euro area are largely due to a rebound in the price of oil since the beginning of the year. While the upturn may be reflected in ECB policy makers’ assessment when they gather in Frankfurt this week, they’ll also have to take into account that inflation still remains well below their goal of just under 2%. (Bloomberg)

German Unemployment Declines for Eighth Month. German unemployment declined for an eighth month in May as companies increased hiring in a sign of confidence that Europe’s largest economy will continue growing. Joblessness fell a seasonally-adjusted 6,000 to 2.79 million, the Federal Labor Agency in Nuremberg said on Tuesday. Economists had predicted a drop of 10,000. The unemployment rate remained at 6.4%, the lowest level since German reunification. Germany’s economy will probably continue to expand in the coming months, supported by consumer spending even as manufacturing remains sluggish, according to the Bundesbank. (Bloomberg)

Greek PM Tsipras Makes 'Realistic' Debt Deal Proposal. Greek Prime Minister Alexis Tsipras says he has issued "a realistic proposal" to the country's international creditors in an attempt to secure a deal over its debts. "We have submitted a realistic plan for Greece to exit the crisis," he said. Mr Tsipras said the plan included "concessions that will be difficult". He is due to meet European Commission President Jean-Claude Juncker in Brussels on Wednesday to discuss the Greek proposals. Mr Tsipras' statement follows talks in Berlin late on Monday attended by the heads of both the IMF and the ECB. IMF chief Christine Lagarde and ECB president Mario Draghi's presence at the meeting between German Chancellor Angela Merkel and France's Francois Hollande underlined the seriousness of the talks. (BBC)

Currencies

Dollar Mauled as Euro Leads Vicious Short Squeeze. The U.S. dollar was broadly lower in early trade on Wednesday as hopes for progress in Greek debt talks and a huge spike in European yields combined to give the euro its biggest gain in three months. The dollar index, which measures it against a basket of six major currencies, was down at 95.943 having shed 1.5% on Tuesday in its biggest one-day drop since July 2013. The euro was enjoying the view at $1.01150, having climbed 2% overnight, while the dollar lapsed back to 124.08 yen and away from a 12.5-year peak of 125.070. The initial catalyst for euro strength was EU data showing a surprisingly large increase in headline and core inflation which suggested the European Central Bank's latest easing campaign was gaining traction. German 10-year Bund yields surged 16 basis points to 0.68%, the biggest jump in about three years (Reuters)

Commodities

Oil Up 2% as Dollar Slips. Oil prices closed at their highest level since December on Tuesday, driven by a weak dollar, and expectations that U.S. crude supplies could have fallen again last week for a fifth straight week. U.S. crude settled up 1.76% at $61.26 a barrel—the highest since Dec 9. Brent crude for July was up 70 cents at $65.50 a barrel. The likelihood of high global supplies from OPEC's lack of will to cut output when it meets this week remained a factor for the market, but did not immediately impact prices. Ministers from the Organization of the Petroleum Exporting Countries, responsible for more than a third of the world's crude output, meet in Vienna on Friday to decide on production policy for the next six months. (Reuters)

Gold Higher as Dollar Softens. Gold edged higher on Tuesday in response to losses in the dollar after disappointing U.S. data and also as uncertainty persisted over whether a high-level meeting on Greece's debt crisis might lead to a significant breakthrough. Spot gold rose 0.4% to $1,193.75 an ounce by 1843 GMT. After a five-day streak of declines, spot platinum was up 0.8% at $1,108.10 an ounce, still close to its lowest in nearly 11 weeks. It was trading at the cheapest to gold since January 2013, with a $90 an ounce discount to the yellow metal. Silver rose 0.4% to $16.77 an ounce, while palladium was down 0.8% at $765.01 an ounce. (Reuters)