This article first appeared in The Edge Malaysia Weekly on July 1, 2019 - July 7, 2019

US President Donald Trump and his Chinese counterpart, Xi Jinping, met on Saturday, amid calls by many world leaders for the two largest economies in the world to come to the negotiation table. The outcome of the meeting is expected to dominate headlines all over the world this week.

United Overseas Bank economist Alvin Liew says there is a prospect of another tariff truce by the US and China after the Trump-Xi meeting. However, a more comprehensive agreement covering trade, technology and foreign exchange (forex) is unlikely to be reached this year, he says in an outlook report for the period of June 24 to July 12.

“We are not expecting US-China trade relations to suddenly become hunky-dory, but we do see the prospect of another tariff truce post-G20 meeting in Osaka, much like last December’s G20 [summit] in Argentina. Our base case (at 60% probability) is that the trade negotiation will be long-drawn-out, well into 2H2019 before some resolution,” he says in the report dated June 21.

“A trade ceasefire will be cheered by the world, but we believe a comprehensive agreement (covering trade, technology, forex and everything the US is asking for) is unlikely to be reached this year. A partial agreement on trade with enforcement measures could be feasible while the rest of the most difficult structural issues, including intellectual property protection and technology transfer, could take years to resolve.”

On Monday, the Organization of the Petroleum Exporting Countries (Opec) will meet in Vienna to decide whether to extend its production cut beyond this month. Investors are hoping that the group and non-Opec major producers, including Russia, will approve the extension, hence soaking up excess oil supplies in the market.

Brent crude was trading at around US$65.75 per barrel last Friday, 17.4% higher than that at the start of the year. Over the last 52 weeks, the crude oil benchmark has lost 15.5% of its value, from US$77.85 per barrel.

Back on the home front, the Department of Statistics is scheduled to release a slew of economic data this week. On Monday, Malaysia’s Nikkei Manufacturing Purchasing Managers’ Index (PMI) for June will be released. The reading for May slipped to 48.8, down slightly from April’s seven-month high of 49.4. A reading above 50 indicates manufacturing output growth while a figure below 50 shows a contraction.

On Thursday, Malaysia’s external trade indices and statistics for May will be announced, followed by the salaries and wages survey report the next day.

Economists polled by Bloomberg are expecting exports to expand by 3.7% year on year in May compared with 1.1% y-o-y in April. Meanwhile, imports are expected to grow at a slower pace of 2.1% y-o-y compared with 4.4% y-o-y in April.

On a year-on-year basis, Malaysia’s export unit value index expanded 2.1% in April while the volume index declined 1%, according to the department. Meanwhile, the import unit value index rose 2.3% while the volume index increased 2.1% in April.

Ahead of Bank Negara Malaysia’s monetary policy meeting on July 9 next week,  bankers and investors are likely to assess trade performance, consumer and producer price indices,  plus the performance of the ringgit in anticipation of the central bank’s monetary policy.

While Bank Negara will only be announcing its monetary policy next week, the Reserve Bank of Australia will be disclosing its policy on Tuesday. The market is anticipating that Australia’s central bank will maintain its overnight policy rate at 1.25%.

IHS Markit will be releasing the manufacturing PMI for June for selected countries in Asia, Europe and the Americas on Monday. Major countries whose data will be announced include Japan, South Korea, Taiwan, China, France, Germany, the UK, the US, Brazil and Mexico.

On the same day, JP Morgan’s global manufacturing PMI will also be released, which will be an indicator of the state of the world’s economy. The index fell to 49.8 in May, the weakest reading since mid-2016.

The newly elected government of India under the premiership of Narendra Modi will present its first budget — for the 2020 financial year — on Friday. The budget will be tabled by Finance Minister Nirmala Sitharaman, the only woman to hold the portfolio after former prime minister Indira Gandhi.

Several holidays will be observed this week, starting with Canada Day on Monday and the US Independence Day on Thursday.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.