Investor sentiment improved as global stock markets rallied and volatility receded following the easing in U.S.-China trade tensions, and supported by the accommodative tone of major central banks. Meanwhile, U.S. employment numbers surged in June, while core inflation ticked up, tempering expectations of an aggressive Fed rate cut at the upcoming July FOMC meeting.

The latest Euro Area data point to continuing weakness in its economic performance, while in the United Kingdom, fears of a Q2 recession mounted following a sharp downturn in private sector activity amid Brexit stagnation.

In the ASEAN+3 region, AMRO staff have revised baseline forecasts downward on the back of continuing weakness in manufacturing and export outturns. Despite the weakening economic outlook, foreign portfolio capital flows to regional emerging markets (EMs) spiked up in June, driven mainly by bond inflows. Regional EM currencies traded mostly weaker against the USD, while long-term borrowing costs in regional EMs continued to be supported by easy global monetary conditions, tracking U.S. Treasuries closely.

The Monthly Update of the ASEAN+3 Regional Economic Outlook (AREO) provides regular, short updates on regional economic developments, to supplement the annual AREO published in May each year. The Updates are published eight times a year, with the April and May editions incorporated into the annual AREO published in May, and the November and December editions into next year’s January Update (Special Edition).