Malaysia

Slowing Factory Output Growth to Weigh on 2Q15 GDP. Industrial production expanded 4.3% YoY in June, a slower pace than the 4.5% in May and largely within expectations. The consensus median was expecting slightly faster growth of 4.4% YoY while the house estimate was aiming for slightly less at 4.2%. During the 2Q15 quarter, IPI growth slowed to 4.3% YoY compared to 1Q15 growth of 6.4%, consistent with expectations for modest GDP expansion in 2Q15 on weak external demand and lackluster domestic consumption following the April implementation of the Goods and Services Tax (GST). Manufacturing output, which alone accounts for about two-thirds of the IPI, was up 4.9% YoY in June compared to 3.2% in May led by the export-oriented Electrical & Electronic sector. (See Economic Viewpoint: Malaysia Industrial Production)

More Than Half of the Economy Slows to 5.0% YoY. The Malaysia Index of Services puts 2Q15 growth in service sector production at 5.0% YoY, down from 7.1% in 1Q15 and an average of 6.5% for 2014. The slowdown in service sector growth in 2Q15 is a reflection of soft consumer spending due to the implementation of the Goods and Services Tax (GST) in April. As the index closely tracks the services (value added) component of GDP, there is now increased certainty that the economy will expand at a far slower pace in 2Q15 than 1Q15. (See Economic Viewpoint: Malaysia 2Q15 Index of Services)

Asia

Singapore Economy Grew 1.8% in Q2. The economy grew 1.8% in the second quarter, slightly faster than an earlier estimate of 1.7% but significantly down from the first quarter's 2.8% expansion, according to Ministry of Trade and Industry data released on Tuesday. The ministry also said it has narrowed its growth forecast for the Singapore economy this year. The Singapore economy is now expected to grow between 2.0% and 2.5% this year, from an earlier forecast of 2.0% to 4.0%. Growth was dragged down by a sluggish manufacturing sector, which contracted 4.9% over the same period last year. The sector, which makes up a fifth of the economy, was weighed down by declines in the transport engineering and biomedical segments. (The Straits Times)

Japan Consumer Mood Worsens. Japanese consumer confidence worsened sharply to hit a six-month low in July, a government survey showed. A separate survey on service workers catering to consumers, such as taxi drivers and restaurant staff, saw they were upbeat on current business conditions but pessimistic on the outlook. An index gauging household sentiment, which includes views of incomes and jobs, fell 1.4 points from the previous month to stand at 40.3 in July, a Cabinet Office survey showed on Monday. The service-sector sentiment index rose to 51.6 in July, up for the first time in three months. (Reuters)

Japan June Current Account in Surplus. Japan posted 12 straight monthly balance of payments gains in June, taking the half-year surplus to its highest in five years. June's current account surplus was 558.6 billion yen ($4.5 billion), Ministry of Finance data showed on Monday. The gain was driven by a rising primary income surplus, which measures profits from investment abroad, and a gain in the travel account due primarily to growth in tourist numbers. In the first half of this year, the current account surplus stood at 8.18 trillion yen, the largest since July-December in 2010. The trade deficit narrowed sharply in January-June from a year before due to the sharp drop in oil prices. (Reuters)

Japanese Dump Most Treasuries in Two Years. Japanese dumped the most U.S. Treasuries in two years in June, as the Federal Reserve prepares to raise interest rates as soon as next month. Investors sold 1.17 trillion yen ($9.4 billion) of long-term Treasuries in June, according to data from Japan’s Ministry of Finance and central bank released Monday. They cut holdings of equivalent bunds by a net 824.3 billion yen, and of French sovereign bonds by 1.28 trillion yen. The premium offered by Group of Seven peers over Japan’s government debt has averaged 103 basis points this year, the lowest on record to 1993. (Bloomberg)

USA

U.S. Consumers Rein in Spending Growth Plans. U.S. consumers last month envisioned the slowest rate of growth in their planned spending in at least two years. The New York Fed’s July Survey of Consumer Expectations found that households expect to increase spending by 3.5% over the next year, down from the 4.3% gain seen in June. It was the lowest reading since the survey started in 2013. Median expected inflation over the next year was unchanged at 3%. (Bloomberg)

U.S. Inflation Temporarily 'Very Low'. U.S. inflation is only temporarily "very low" due in part to commodity prices, while the U.S. economy has nearly achieved full employment, Federal Reserve Vice Chairman Stanley Fischer said on Monday. The Fed's preferred inflation measure is 1.3%, below its 2-percent target, which has sown caution among some policymakers. Globally, Fischer said the deflationary trend is one of many factors the U.S. central bank is watching. (Reuters)

Europe

Russian GDP Plunges 4.6%. Russia’s economy shrank the most since 2009 after a currency crisis jolted consumer demand, while a selloff in oil threatens to drag the country into a deeper recession. GDP contracted 4.6% in the second quarter from a year earlier after a 2.2% decline in the previous three months, the Federal Statistics Service in Moscow said on Monday. That was worse than the median forecast for a 4.5% slump in a survey of 18 analysts. The ruble has depreciated about 43% against the dollar in the past 12 months, the worst performance globally. (Bloomberg)

OECD Indicator Firms for Eurozone. Economic growth is showing further signs of firming in France, Italy and the euro zone overall, the Organisation for Economic Co-operation and Development said. Trends are pointing more strongly to a loss in growth momentum in China, meanwhile, according to the OECD's monthly leading indicator, a measure designed to flag turning points in the international economy. Stable growth momentum is expected in Germany, Japan and India. The indicator, a synthetic index where 100 is the long-term average, remained at 100.7 in the euro zone for the fourth consecutive month in June. Britain's reading slipped to 99.8 in June, having dipped below 100 to 99.9 in May. The index rose month-on-month to 100.8 from 100.7 in France and was stable at 100.9 in Italy. The reading for Germany was stable at 100.0. (Reuters)

Currencies

Dollar Falls as Optimism Spurs Pullback on Bullish Bets. The U.S. dollar fell against the euro on Monday after optimism about the global economy led traders with longstanding bullish bets on the dollar to pare their positions in favor of the euro. The dollar index was last down 0.38% at 97.186. The euro was last up 0.47% against the dollar at $1.10165. The dollar was last up 0.34% against the yen at 124.620 yen. (Reuters)

Ringgit drops to new low last seen in 1998.The ringgit yesterday plumbed lows last seen during the Asian financial crisis 17 years ago, after news that Malaysia's foreign exchange reserves fell below the US$100 billion (S$138 billion) threshold, raising doubts over the currency's ability to withstand pressure from political uncertainty and slower growth. The ringgit dropped to 3.9300 per US dollar, compared with the previous close of 3.9220. It was the weakest level since Sept 2, 1998, the day before the government pegged it at 3.8000 per dollar to put a floor under the currency during the Asian financial crisis. Malaysia's international reserves fell to US$96.7 billion as of July 31 from US$100.5 billion on July 15, central bank data showed last Friday. (Straits Times)

Commodities

Crude Oil Rebounds Along With U.S. Gasoline. Oil jumped almost 4% on Monday after a rally in U.S. gasoline and diesel due to a refinery outage helped crude futures advance from multi-month lows. The dollar's drop to a near two-week low also made oil denominated in the greenback more affordable to holders of other currencies. Brent, the global benchmark for oil, rose 3.7%, posting its largest gain since end-May. Brent crude settled up $1.80 at $50.41 a barrel. U.S. crude rose 2.5%, its most in two months. U.S. crude settled $1.09 up at $44.96 a barrel. (Reuters)

Gold Tops $1,100 on September Rate Hike Uncertainty. Gold rose 1% to above $1,100 an ounce on Monday, its biggest increase in more than seven weeks, as the U.S. dollar turned lower and comments from Federal Reserve officials raised uncertainty about a September rate hike. Spot gold was up 1% at $1,103 an ounce at 1927 GMT, while U.S. gold futures for December delivery settled up 0.9% at $1,104.10 an ounce. Spot platinum gained the most, rising 3.1% to $989.50 an ounce, a session high. Spot palladium rose 1.3% to $605.50 an ounce while silver was up 2.5% at $15.21 an ounce. (Reuters)