Malaysia

Funds to Return to Malaysia, Says Zeti. Speaking from Switzerland, Bank Negara governor Tan Sri Zeti Akhtar Aziz said the outflow of funds will eventually reverse and come back to Malaysia. She reiterated that the ringgit isn’t reflecting underlying fundamentals and is instead reflecting market sentiment. Asian economies, including Malaysia, have a high degree of resilience even if they are not immune to global developments, she added, saying that Asia has continued to be important growth center in global economy. (Bloomberg)

Asia

China to Hold Some Veto Powers in New Asian Bank. China will hold over a quarter of the votes in the new Asian Infrastructure Investment Bank (AIIB), its finance ministry said on Monday, giving it a veto in some key decisions despite Beijing insisting it will not have such powers. Delegates from 57 countries gathered in Beijing to witness the signing of the articles of agreement for the Chinese-led development bank. Fifty countries signed the agreement, amongst them Iran, Australia and Britain. Seven - Denmark, Kuwait, Malaysia, Philippines, Holland and South Africa and Thailand - refrained from signing as they had not yet won domestic approval and are likely to do so later in the year. (Reuters)

South Korea May Factory Output Falls for Third Consecutive Month. South Korea's industrial output fell by a seasonally adjusted 1.3% in May from April, data showed on Tuesday, marking a third consecutive monthly drop as exports slowed amid sluggish global demand. Actual numbers fared worse than the median forecast in a survey of economists, which called for a decline of 0.7% in May on-month. The statistics agency data also showed that service-sector output slipped by a seasonally adjusted 0.4% in May. (Reuters)

Indonesia to Expand Corporate Tax Discounts. Indonesia's government plans to offer corporate tax discounts under a revised tax holiday regulation to attract investors and boost economic growth, the Jakarta Post reported on Monday, citing Finance Minister Bambang Brodjonegoro. The government would offer discounts ranging from 20% to 100%, with the change coming as early as July. It currently offers tax breaks over 5-10 years to companies investing at least 1 trillion rupiah (US$74.8 million) in certain sectors, but plans to extend the length to 15-20 years. The sectors included in the policy would also be broadened, but the minimum investment required would remain 1 trillion rupiah. (Reuters)

Southeast Asia Auto Sales Continue Long Slide. New-auto sales in six major Southeast Asian markets fell for the 25th consecutive month in May, with tough times expected to continue for the top twoIndonesia and Thailand. The six, also including Malaysia, the Philippines, Vietnam and Singapore, as a whole sold 235,813 vehicles in May, down 9% on the year. Regional leader Indonesia saw sales slide 18% to 79,236 units, declining for the ninth consecutive month. The Thai market slumped for the 25th consecutive month with sales down 18% to 56,942 units, due partly to tighter restrictions on consumer loans. Malaysia's 8% drop in sales to 51,254 units was a smaller decline than the previous month. (Nikkei)

USA

Pending Home Sales Climb to 9-Year High. More Americans signed contracts to purchase homes in May, as pending sales climbed to their highest level in more than nine years. The National Association of Realtors said Monday that its seasonally adjusted pending home sales index rose 0.9% to 112.6 last month. The index has increased 10.4% over the past 12 months, putting it just below the April 2006 level. Steady job growth coupled with low but rising mortgage rates has created greater urgency to buy homes. (AP)

Incomes Rise for Bottom 99% but Inequality Worsens. Incomes for the bottom 99% of American families rose 3.3% last year to $47,213, the biggest annual gain in the past 15 years, according to data compiled by economist Emmanuel Saez and released Monday by the Washington Center for Equitable Growth. "For the bottom 99% of income earners, this marks the first year of real recovery from the income losses sparked by the Great Recession," Saez, a professor at the University of California-Berkeley, said. Still, income inequality worsened in 2014. The richest 1% of Americans posted a much bigger increase in pay as their incomes soared an average of 10.8% to $1.3 million. (AP)

Europe

Negligible German Inflation Suggests ECB Policy Yet To Bite. Inflation in the euro zone may have slowed more sharply than previously expected in June after German consumer prices barely increased in the month, a sign that the European Central Bank's money-printing has yet to take hold. Preliminary data for Europe's largest economy showed on Monday that consumer prices, harmonized to compare with other European countries (HCIP), inched up by only 0.1% on the year, a steep drop from the 0.7% increase in May. (Reuters)

Eurozone Sentiment Slips in Early Sign of Greek Impact. Confidence in the eurozone's economy slipped in June after a strong start to the year, an early sign that the threat of default in Greece may be starting to dampen economic morale in the bloc. The European Commission's monthly economic sentiment indicator was 103.5, down versus May and slightly worse than the 103.8 forecast by economists. Business morale fell to 0.14. Weeks of uncertainty surrounding Greece's have intensified dramatically after the breakdown of talks between Greece and its creditors. The Commission's survey was conducted before the weekend collapse in negotiations. (Reuters)

Referendum Question Asks Greeks Simply to Accept or Reject Creditors' Plan. The Greek government on Monday published the text of the question it plans to put to citizens in a referendum on Sunday, asking them to decide whether or not to accept the demands made by international lenders in return for fresh cash to keep Greece from defaulting on its debts. The referendum poses a simple question: "Should the proposal that was submitted by the European Commission, the European Central Bank and the International Monetary Fund at the Eurogroup of June 25, 2015, which consists of two parts that together constitute their comprehensive proposal, be accepted?" (Reuters)

Greece to Default on $1.73 Billion IMF Payment. European leaders appealed to Greeks to vote “yes” in a referendum on their country’s bailout, warning that the risk of Greece’s exit from the euro was real, as Athens confirmed it wouldn’t be able to make a loan repayment. As of Tuesday, Greece will be cut loose from international rescue loans for the first time in more than five years. It will default on a €1.55 billion ($1.73 billion) IMF payment, whose deadline is the same day. (WSJ)

Currencies

Euro Drops on Greek Worries while Rallying against Dollar. The euro fell against most other major currencies on Monday as Greece's debt crisis worsened and moved the nation closer to exiting the euro zone. Still, the euro rose nearly 1% against the dollar after dropping earlier, as some investors unwound trading positions by buying the euro, according to traders. Greece Prime Minister Alexis Tsipras announced bank holidays and other capital controls to keep banks from collapsing under the weight of mass withdrawals. The euro fell sharply in response, to as low as $1.0956 against the dollar, but was last trading up about 0.70% at $1.1239. The yen, a popular safe-haven currency, was up 0.45% against the euro at 137.69. The dollar was generally down as currency traders awaited Thursday's U.S. employment report for June, which may help trigger a rise in U.S. interest rates. The dollar index was last off 0.60%. The dollar was down 1.10% against the yen, and off 0.10% against sterling at $1.5729. (Reuters)

Malaysian Ringgit Falls to 10-Year Low on Fitch Review. The ringgit fell to a decade-low as Fitch Ratings decides whether or not to downgrade Malaysia and Greece’s potential exit from the euro spurs demand for dollars. Fitch, which ranks Malaysia at A- with a negative outlook, will review its assessment before the end of June, Andrew Colquhoun, head of Asia Pacific sovereign ratings in Hong Kong, said last week. The country is “more than 50% likely” to be downgraded. The ringgit dropped 0.4% to 3.7843 a dollar in Kuala Lumpur on Monday. It fell to 3.7887 earlier, the weakest since July 2005, and has lost 7.6% this year in Asia’s worst performance. (Bloomberg)

Commodities

Oil Hits Three-Week Lows as Greek Crisis Worsens. Crude futures hit 3-week lows on Monday as Greece shut its banks and imposed capital controls, causing widespread risk aversion, while Iran looked likely to extend nuclear negotiations with the West to export more of its oil into an oversupplied market. Brent crude futures settled down $1.25, or almost 2%, at $62.01 a barrel, its weakest finish since June 5. U.S. crude closed down $1.30, or 2.2%, at $58.33 a barrel, its lowest settlement since June 8. (Reuters)

Gold Firms as Greece Fears Pressure Global Stock Markets. Gold firmed on Monday, as the prospect of a Greek debt default hit global shares, offsetting wariness among investors over the metal's longer-term outlook. Gold, which often benefits from uncertainty in the wider financial markets, initially rallied to a near one-week high at $1,186.91, but later gave up some of those gains. Spot gold was up 0.4% at $1,178.90 an ounce at 1845 GMT, on track to close the second quarter down 0.3%, the fourth straight weak quarter. Spot palladium fell to a two-year low at $663.25 an ounce, and was on track to finish the quarter down 9.2%. Among other precious metals, silver was down 0.6% at $15.67 an ounce and platinum was down 0.04% at $1,074.50 an ounce. (Reuters)