Global

OECD Cuts Global Growth Outlook as Investment Lags. The Organization for Economic Cooperation and Development cut its global growth forecast, saying investment is lagging and risks including a possible Greek default are hurting confidence. The world economy will expand 3.1% this year, down from the 3.7% predicted last October, the Paris-based organization said in a semi-annual report. That compares with global growth of about 3.9% a year on average in the decade through 2011. Last year, the world economy grew 3.3%. Big companies are reluctant to spend on plants, equipment and technology as they did in past recoveries, the organization said. “We’re looking at a global economy that in some respects is moderately good,” OECD Chief Economist Catherine Mann said. “There’s a lot of monetary accommodation, less fiscal drag; most countries are enjoying the reduction in oil prices.” (Bloomberg)

Malaysia

1MDB Gives Breakdown on Use of RM42 Billion. 1Malaysia Development Bhd (1MDB) has given a clear breakdown of how the RM42 billion debt raised by the strategic development company was used in a move to counter criticism. The debt was used to buy power assets and land, for financial expenditure and to deposit in investment funds, leaving surplus cash of RM0.9 billion, said 1MDB CEO Arul Kanda Kandasamy in a statement. RM18 billion was used to finance the purchase of power assets. A smaller sum of RM1.7 billion was spent on land purchases. 1MDB also deposited RM15.4 billion in investments funds and reported RM5.8 billion in financial expenditure incurred, of which RM4.5 billion was tagged as finance cost and working capital. (Bernama)

Bank Negara Launches Formal Inquiry into 1MDB. Bank Negara Malaysia (BNM) has launched formal investigations into 1Malaysia Development Bhd (1MDB) for possible breach of their rules. In a statement issued late last evening, BNM said the rules pertain to approvals needed for investments abroad or for obtaining offshore borrowings. The central bank said the inquiry involves the issuance of a legal directive requiring information from 1MDB, and that it is also taking statements from individuals involved in the governance process and obtaining information from other relevant domestic and foreign parties. (The Sun)

Asia- Pacific

Australia’s Growth Accelerates as New Mines Drive Export Surge. Australia grew faster than forecast last quarter as newly built mines boosted exports, validating the central bank’s decision to keep interest rates steady. Data Wednesday showed GDP advanced 0.9% from the final three months of 2014, above the median forecast for a 0.7% gain. The economy was spurred by a 5% jump in exports in the first quarter even as commodity prices fell. The report spans a period when Australia ended an 18-month pause in interest-rate cuts and the currency slid 7%, improving companies’ competitiveness and lifting consumers’ spirits. Even so, firms in Australia plan to cut investment in the next 12 months by the most on record, betting they can meet demand with existing capacity amid weak wage growth. (Bloomberg)

USA

Trade Gap in U.S. Narrows More Than Forecast as Imports Fall. The trade deficit in the U.S. narrowed more than forecast in April as imports receded, signaling merchandise flows were returning to normal following a port-related surge. The gap shrank by 19.2% to $40.9 billion from the prior month’s $50.6 billion that was the widest in more than six years, Commerce Department figures showed. The median forecast in a survey of 72 economists called for a deficit of $44 billion. Purchases of foreign-made goods declined after the end of a labor dispute at West Coast ports caused them to jump in March. Trade may become less of a detriment as a more stable dollar and strengthening markets in Europe underpin overseas demand for American-made goods. At the same time, crude-oil production continues to limit imports after the petroleum gap fell in April to the lowest in 13 years. (Bloomberg)

ISM Service-Sector Index Eases in May. The U.S. nonmanufacturing sector lost some momentum in May, according to data released Wednesday by the Institute for Supply Management. But troubles in the mining sector may have contributed to the slowdown. The ISM’s nonmanufacturing purchasing managers index came in at a 12-month low of 55.7 in May from 57.8 in April. Forecasters surveyed had expected last month’s PMI to be little changed at 57.1. Mining was the only industry to report a contraction in May, and it was the only one to report declines in production, new orders, and employment. The ISM said mining accounts for 2.79% of the survey. (The Wall Street Journal)

U.S. Economy Expanded between April and May says Fed. The US Federal Reserve said the economy grew between April and May in its latest assessment of the economy, rebounding from a contraction in the first quarter. In the so-called Beige book, it said surveys from across the country suggested "overall economic activity expanded" from early April to late May. "Outlooks among respondents were generally optimistic", the report said. Growth in the US unexpectedly shrank in the first three months of the year. The contraction was mainly attributed to a particularly harsh winter and most economists were expecting a pick-up. (BBC)

Europe

ECB Keeps Interest Rates on Hold as Deflation Risk Fades. The European Central Bank kept interest rates on hold at record lows as data signaled that the risk of deflation in the euro area is waning. The Governing Council, meeting in Frankfurt, maintained the benchmark rate at 0.05%. The deposit rate and the marginal lending rate stayed at minus 0.2% and 0.3%, respectively. (Bloomberg)

ECB Raises Inflation Forecast but Sees Growth Momentum Faltering. The European Central Bank raised its forecast for inflation this year but said on Wednesday there were some signs of economic recovery losing momentum across the euro zone. The ECB raised its inflation forecast to 0.3% for this year, having previously put it at zero, saying that its trillion-euro-plus asset buying programme was paying off but had to be seen through. Inflation next year is seen at 1.5% and on growth, ECB staff kept forecasts unchanged at 1.5% this year and 1.9% in 2016. "Inflation bottomed out at the beginning of the year," Draghi said. "The recovery is on track. However, we had expected stronger figures than our projections ... There has been some modest loss of momentum." (Reuters)

U.K. House-Price Growth Cools to Slowest in Almost Two Years. U.K. house-price growth cooled in May and the slowdown may continue if home supply increases, Nationwide Building Society said. Values advanced an annual 4.6%, down from 5.2% in April, the lender said in a statement on Wednesday. That’s the smallest advance since August 2013. Prices rose 0.3% on the month to 195,166 pounds ($300,000). An imbalance between supply and demand has supported prices and prompted groups including the Royal Institution of Chartered Surveyors to warn that Britain faces a housing crisis unless homebuilding is ramped up. Prime Minister David Cameron’s Conservative Party has pledged to build 200,000 “starter homes” for first-time buyers under the age of 40. (Bloomberg)

U.K. Services Grew in May at Slowest Pace in Five Months. U.K. services expanded at the weakest pace in five months in May as growth in new business slowed.An index of business activity fell to 56.5 from 59.5 in April, Markit Economics Ltd. said on Wednesday in London. Economists had forecast a slight decline to 59.2. The report, taken together with the recent surveys on manufacturing and construction, point to economic growth of 0.5% in the second quarter, Markit said. Official data show the economy expanded 0.3% in the first three months of the year, the weakest reading since 2012.The figures raise “doubts about the ability of the economy to rebound convincingly from the weakness seen at the start of the year,” said Chris Williamson, chief economist at Markit. (Bloomberg)

Currencies

Dollar Slips against Euro on ECB Comments. The U.S. dollar hit its lowest against the euro in over two weeks on Wednesday after the European Central Bank kept monetary policy steady and Bund yields extended their rise. The euro has also notched gains in the past two sessions by tracking a rise in Bund yields. Benchmark 10-year Bund yields hit 0.89% Wednesday, their highest since October. The euro was last up 1.07% against the dollar at $1.12695 after hitting a more than two-week high of $1.12855. The dollar rose slightly against the yen at 124.300 yen and rose against the Swiss franc at 0.93480 franc after mixed U.S. economic data. The dollar index was last down 0.51% at 95.342. (Reuters)

Myanmar's Central Bank Lowers Dollar Withdrawal Cap. The Central Bank of Myanmar has cut the daily limit on dollar withdrawals from bank accounts, aiming to limit a drop in foreign exchange reserves rooted in a widening trade deficit. Dollar-based cash withdrawals had been capped at $10,000 a day per account, up to $50,000 a week, but this has been slashed to $10,000 a week. The new cap owes to Myanmar's trade deficit, which has been skyrocketing since the transition to democracy began in 2011. Myanmar has run a negative trade balance since fiscal 2012, as economic growth has led to soaring imports of such items as automobiles and industrial machinery. (Nikkei)

Commodities

Oil Down 3% despite U.S. Stockpile Drop. Oil fell nearly 3% on Wednesday as traders and investors ignored a fifth straight weekly decline in U.S. crude stockpiles to focus instead on a big build in distillates, including diesel, as the peak season for U.S. road travel gets under way. Glum sentiment ahead of Friday's meeting of the Organization of the Petroleum Exporting Countries also weighed on the market. OPEC, which pumps more than a third of the world's oil, is expected to reject any calls for output cuts, continuing to produce about 2 million barrels per day above demand. Brent crude settled down $1.69, or 2.6%, at $63.80 a barrel. U.S. crude also settled down 2.6%, or $1.62, at $59.64. (Reuters)

Some OPEC Members Moot $80 as ‘Fair’ Oil Price. Some OPEC members are publicly talking for the first time about a new "fair" price for their crude. Oil ministers from Iraq, Venezuela and Angola said in Vienna this week that a price of $75 or $80 a barrel - barely $10 above the going rate - could be just fine. Iraq's Adel Abdel Mahdi said it would be "equitable". Importantly, Saudi Arabia - which for years had pointed to $100 a barrel as a "fair price for producers and consumers" - has given no indication that it subscribes to this view. (Reuters)

Gold at 3-Week Low on Stronger U.S. Data. Gold fell to a three-week low on Wednesday as data showed the U.S. private sector added more jobs than expected in May and prospects increased of a debt deal for Greece. Spot gold was down 0.7% at $1,185.56 an ounce by 1856 GMT after falling more than 1% to the lowest since May 11 at $1,179.43. Sentiment towards the metal remained bearish, as shown by outflows from gold exchange-traded funds. Spot platinum was down 0.9% at $1,098.75 an ounce and still trading at its cheapest to gold since January 2013, with a $90 discount. Silver fell 1.6% to $16.48 an ounce, having hit a three-week low of $16.35, while palladium lost 1.3% to $756.25 an ounce. (Reuters)