Global

• Emerging Markets Had Biggest Outflow Since 2009. Capital outflows from developing countries reached $120 billion last quarter, the most since 2009, fueled by an exodus from China amid concern over the strength of the country’s economy. Investors pulled $142 billion from China between April and June. That extended the total outflow from the world’s second-largest economy over the past five quarters to $520 billion, wiping out all the inflows since 2011. Capital is leaking out from emerging markets as their economic expansion slows. (Bloomberg)

Malaysia

• Malaysia-Turkey FTA Comes into Effect on Aug 1. The Malaysia-Turkey Free Trade Agreement (MTFTA) will come into effect on Aug 1, 2015, International Trade and Industry Minister Datuk Seri Mustapa Mohamed announced today. According to the minister, both Malaysia and Turkey will eliminate and bind duties on 70% of the tariff lines, upon entry into force of the Agreement. After a period of eight years, duties will be reduced for almost 86% of tariff lines. In 2014, total trade between Malaysia and Turkey amounted to US$969 million. Malaysia's exports to Turkey totalled US$752 million, while imports amounted to US$217 million. (Bernama)

Asia

• China Says FDI Inflows Rose 8.0% on Year in 1H15. China's foreign direct investment inflows rose 8.0% in the first six months from a year earlier. Investment into China's fast-growing services sector jumped 23.0% in the first half of 2015 from a year earlier, accounting for more than 60% of the period's total FDI. Last year, China drew a record $119.6 billion of FDI. China's outbound direct investment (ODI) soared 29.2% to $56 billion in January-June from a year earlier. The government has been encouraging firms to invest abroad to slow the rapid build-up of foreign exchange reserves and help domestic firms become more competitive internationally. (Reuters) 
• Japan to Set Budget Deficit Estimate at Around Y6.4 Trillion in 2020. The Japanese government is set to estimate that the nation's primary budget deficit will be around 6.4 trillion yen ($51.55 billion) in the fiscal year to March 2021, down from a projection five months ago of 9.4 trillion yen. The new estimate is based partly on an expected rise in tax revenue on the back of improved corporate earnings. Japan's new fiscal guidelines maintained an earlier target of returning to a primary budget surplus in fiscal 2020 and then lowering the debt-to-GDP ratio, which is the worst in the industrialized world at more than twice the size of the economy. (Reuters) 
• Japan to Earmark $32 Billion for Growth Measures. Japan will set aside roughly $32 billion in next fiscal year's state budget for measures to boost the economy's productivity. The move will be part of Abe's strategy to lift Japan's long-term growth potential and reflate the economy. The government will curb spending in other areas such as public works. The 4 trillion yen ($32 billion) pool will be spent on development of robotics and artificial intelligence, as well as on measures to boost service-sector productivity and female labor participation. (Reuters)

USA

• U.S. Jobless Claims, Housing Data Point to Firming Economy. The number of new applications for unemployment benefits fell more than expected last week and confidence among homebuilders held at a more than 9-1/2-year high in July. Initial claims for state unemployment benefits fell 15,000 to a seasonally adjusted 281,000 for the week ended July 11. The decline ended three straight weeks of increases. A separate report showed the NAHB/Wells Fargo Housing Market index stood at 60 this month, the highest since November 2005. Readings above 50 indicate more builders view market conditions as favorable than poor. But manufacturing continues to lag. In a third report, the Philadelphia Fed said its business activity index fell to 5.7 this month from a reading of 15.2 in June. (Reuters) 
• Rising Gas Prices Push Inflation Up Modestly in June. Rising gasoline prices pushed inflation up modestly in June, leaving overall consumer prices higher than they were a year earlier for the first time since December. Economists say the tick up in consumer prices makes it more likely the Federal Reserve will end a policy of keeping short-term interest rates near zero. Consumer price index rose 0.3% last month. Prices at the pump rose 3.4% in June. Core inflation rose 0.2% last month. (AP) 
• Foreign Inflows Into U.S. Treasuries in May Largest in More Than A Year. Foreign inflows into U.S. Treasuries in May rose to their highest level in more than a year, as concerns about Greece and the Chinese stock market spurred a flight to safe assets. Offshore purchases of U.S. Treasuries totaled $53.4 billion in May, the largest since February 2014. Foreign investors bought U.S. government debt for a third straight month. Overseas investors bought $115 billion in May compared with $107.9 billion the previous month. China is still the largest holder of U.S. government debt. (Reuters) 
• Consumer Sentiment in U.S. Retreats in July. Consumer confidence declined in July on concerns global risks will dim prospects for the U.S. economy. The University of Michigan’s preliminary index of sentiment dropped to 93.3 during the month from 96.1 in June. The median forecast of economists called for a reading of 96. Consumers remained upbeat about employment and wages. The survey’s gauge of expectations six months from now fell to 85.2 from 87.8 in June. The gauge of current conditions decreased to 106 from 108.9 last month. (Bloomberg) 
• U.S. Fed Funds Rate Highest in Nearly Three Weeks. The U.S. federal funds rate averaged 0.24% on Thursday, the highest since June 29 and up from 0.13% on Wednesday. The fed funds rate, which the Fed targets to achieve its rate objective, traded for a third day in a range of 0.06% to 0.3125%. (Reuters)

Europe

• Greek Parliament Approves Bailout Measures. The Greek parliament passed sweeping austerity measures demanded by lenders to open talks on a new multibillion-euro bailout package to keep Greece in the euro. The package was approved with 229 votes in the 300-seat chamber. Tsipras said there was no alternative to the package, which he acknowledged would cause hardship, but he stood by the decision. (Reuters) 
• EU Said to Agree on Balance to 7 Billion-Euro Greece Loan. Euro-area finance ministers authorized a 7 billion-euro ($7.6 billion) bridge loan to Greece, according to Irish Prime Minister Enda Kenny, paving the way for a third bailout that may allow Europe’s most indebted nation to stay in the common currency. Member states also must consider whether to move ahead with the full bailout proposed for Greece. The short-term financing is needed so that Greece can meet a 3.5 billion-euro payment due to the European Central Bank on Monday, and keep the country afloat while Tsipras negotiates the details of a three-year bailout of as much as 86 billion euros. That aid package would come from the euro-area’s permanent firewall fund, the European Stability Mechanism. (Bloomberg) 
• Softer Euro Zone Inflation Confirmed in June. Inflation in the euro zone softened in June, as energy costs weakened and price rises of food and services eased after a spike in May. Eurostat said consumer prices in the 19 countries sharing the euro were unchanged month-on-month in June for a 0.2% year-on-year reading, confirming its earlier estimate. Inflation in May was 0.3%. The ECB expects euro zone inflation to rise to 1.5% in 2016 and 1.8%, about at its target, in 2017. (Reuters) 
• Eurozone Exports Drop in May. The Eurozone’s adjusted trade surplus narrowed in May as exports dropped from April, a sign that a weaker euro has yet to provide a lasting boost to the region’s economy. The Eurozone had a surplus in its trade in goods with the rest of the world of €21.2 billion ($23.1 billion) in May, down from €23.9 billion in April this year. Exports dropped 1.5% on the month, while imports remained nearly stable. (WSJ) 
• ECB Presses Ahead with Quantitative Easing, Promises More Action if Necessary. The European Central Bank's 60 billion euros ($65.22 billion) per month asset purchase program will continue until September 2016 or until inflation rises to its target. ECB President Mario Draghi said if any factors were to lead to an unwarranted tightening of monetary policy, or if the outlook for price stability were to materially change, ECB would respond to such a situation by using all the instruments available within its mandate. (Reuters)

Currencies

• Dollar gains traction with Fed hike view back in focus. The dollar held at two-month highs against a basket of major currencies early on Friday, having extended gains as the market shifted its focus to an eventual hike in U.S. interest rates. The dollar index stood at 97.618, having risen as far as 97.756. A break above 97.775 will take the index back to highs last seen in April. The greenback scaled a near one-month peak of 124.205 yen, while the euro struggled at $1.0884, not far off a 7-1/2 week low of $1.0855 set overnight. The dollar index was up nearly 2% in a week that saw Federal Reserve Chair Janet Yellen reiterate that U.S. interest rates will probably be lifted later in the year. Sterling raced to a 7-1/2 year high on the euro, which skidded to 69.58 pence. Against the dollar, the pound stood at $1.5608, having peaked at a two-week high of $1.5676 on Wednesday. (Reuters)

Commodities

• U.S. oil drillers cut 7 rigs as crude prices collapse. The resurgence in drilling seen earlier this month seemed to fizzle this week as U.S. energy firms cut seven oil rigs, oil services company Baker Hughes Inc data showed on Friday. The decline came as U.S. crude oil prices have fallen nearly 15% this month in the biggest slump since December. U.S. crude futures briefly turned higher fell back to $50.47 a barrel, down 44 cents on Friday. Brent crude was down 14 cents at $56.78, having held its small gains, then retreating and seesawing near unchanged. (Reuters) 
• Gold at 5-year low on Fed rate rise prospect. Gold fell to a five-year low on Friday, pressured by a strong dollar and expectations for a U.S. rate hike this year, and as China bought less than expected over the past six years. Platinum fell below the key $1,000-an-ounce level for the first time in more than six years while palladium extended losses to hit its lowest since November 2012. China's gold reserves were up 57% at the end of June, from the last time it adjusted its reserve figures more than six years ago, the central bank said. Despite the tonnage increase, gold now accounts for 1.65% of China's total forex reserves, against 1.8% in June 2009. Spot gold was last down 1% at $1,133.13. Spot platinum fell 1.4% to $991 an ounce. Palladium slipped 2.5% to $613.47. Spot silver was down 0.9% at $14.84 an ounce. (Reuters)

Source: Kenanga Research - 20 Jul 2015