The Week Ahead: EU leaders’ summit, Malaysia’s CPI in focus

Leaders of the 27 European Union (EU) states are gathering on July 17 and 18 to resolve their differences over a €750 billion (RM3.65 trillion) recovery fund to help the bloc recover from the Covid-19 crisis. The outcome of the meeting in Brussels is expected to set the direction for financial markets over the coming months.

An eventual decision or agreement should stabilise bond yields, according to UOB Global Economics & Markets Research. “However, any postponement or disagreement could add pressure on peripheral yields,” it says.

Meanwhile, it is a particularly busy week ahead on the Asian economic calendar, with inflation, industrial output and trade numbers for June dominating the data flow.

China will kick off the economic data releases with its July one-year and five-year loan prime rate fixings on Monday (July 20). UOB Global Economics & Markets Research expects both rates to stay unchanged at 3.85% and 4.65% respectively.

Taiwan will also release its June export orders on Monday, followed by its June unemployment rate on Wednesday and June industrial production data on Thursday.

June inflation data for Malaysia, Hong Kong and Singapore will also be in focus as markets try to assess whether inflation or deflation looks set to dominate the post-Covid-19 world. On Monday, Hong Kong’s June unemployment rate will be released while its June Consumer Price Index (CPI) data is due out on Tuesday.

On Wednesday, expect Malaysia’s inflation figures for June to be announced. In May, the CPI declined 2.9%, as in April, marking three months of deflation. A Bloomberg survey shows economists having a median estimate of -1.9% for June. Bank Negara Malaysia expects negative inflation or deflation for the full year, primarily reflecting lower global oil prices.

South Korea reports its second-quarter 2020 gross domestic product numbers on Thursday. The Bloomberg median estimate is a decline of 2% year on year from +1.4% in 1Q.

Nothing much is going on this week in terms of macro policymaking. It will be a regular work week for most of Asia except Myanmar, which will celebrate Martyr’s Day on Monday. Thailand will announce its June trade on Wednesday before it goes on a long weekend to celebrate the Songkran festival and the King’s birthday.

The same cannot be said about parliament, though, as Malaysia this week continues its first parliamentary session since Prime Minister Tan Sri Muhyiddin Yassin took the reins in March, with a new speaker Datuk Azhar Azizan Harun and first female deputy speaker in Datuk Seri Azalina Othman Said having been appointed.

During the first week, the former Election Commissions chief had already booted a member of parliament (MP) out of Dewan Rakyat, as well as ordered Baling MP Datuk Seri Abdul Azeez Abdul Rahim to apologise to Batu Kawan MP Kasthuriraani Patto for offensive remarks he directed at her last week.

Still, all eyes are on Langkawi MP Tun Dr Mahathir Mohamad’s motion of no-confidence against Muhyiddin. The motion was inserted as item 27 in the Order Paper.

Meanwhile, the courts are to take a breather from former prime minister Datuk Seri Najib Razak’s corruption trial over 1Malaysia Development Bhd (1MDB) funds this week. The trial, which is being heard before High Court judge Collin Lawrence Sequerah, will resume on Aug 3, with cross-examination of former 1MDB CEO Datuk Shahrol Azral Ibrahim Halmi to resume then.

On Thursday (July 23), High Court judge Mohamed Zaini Mazlan will hear Najib’s application to strike out charges against him in the 1MDB audit report tampering case. On the same day, the federal court will hear Damansara MP Tony Pua Kiam Wee’s appeal against the appellate court’s decision last year to uphold the withdrawal of Najib’s suit against Pua regarding a Facebook live session he had on the proposed amendment to the Syariah Courts (Criminal Jurisdiction) Act 1965 by PAS.

On the corporate front, Boustead Heavy Industries Corp Bhd will hold its virtual annual general meeting on Tuesday (July 21), Bertam Alliance Bhd will hold its AGM on Thursday (see “Bertam Alliance’s major shareholders fall out” on Page 20) and DWL Resources Bhd will have an extraordinary general meeting on Friday to discuss the diversification of its businesses to include money lending and a change of name to KTG Bhd.

In developed economies, the focus for the US will stay on its corporate earnings reporting season, with nearly 90 Standard & Poor’s 500 companies from the technology, consumer discretionary, airlines, defence, oil, pharmaceuticals and healthcare industries reporting this week.

Investors are also counting on US policymakers to adopt more stimulus measures as the world’s largest economy struggles to contain the pandemic. The US Congress is set to begin debating such a package this week.

On Monday, Japan will announce its June trade numbers and June CPI the following day in a holiday-shortened week.