Malaysia

All Eyes On Next Rate Hike. Bank Negara Malaysia is not going to “run the economy to the ground” to achieve low inflation, said governor Tan Sri Dr Zeti Akhtar Aziz. Risks to growth have to be taken into account, too, she said, cautioning that any significant brakes will be the cause for some pausing in the further raising of interest rates in the near term. Zeti, in an interview with Bloomberg on the sidelines of the Global Islamic Finance Forum, explained the various factors needed before the central bank decides to continue with the hiking cycle. “We will look at what the risks are to inflation and the underlying inflation, rather than one-off adjustments that result in higher prices. “In any case, the actions that we have already taken are part of a normalisation because the interest rate that is currently prevailing is very supportive of growth.” The monetary policy will continue to refer to normalisation of the interest rate when it does not have a dampening effect on growth, she added. “This is adjusting the degree of accommodation, so that it will not promote financial imbalances.” (NST)

Asia

Bank Of Japan Keeps Monetary Policy Unchanged. The Bank of Japan (BOJ) on Thursday refrained from announcing fresh stimulus, in a widely-expected decision, despite increasing evidence the recovery in the world's third-biggest economy is sputtering. The central bank stuck to its pledge to increase base money by 60-70 trillion yen ($572-$667bil) per year via aggressive asset purchases, mostly in Japanese government bonds. In an accompanying statement the BOJ said it expects the trend of moderate economic recovery to continue. It cut its view on housing investment citing the continued effect of the April sales tax hike but noted that private consumption remains firm. (CNBC)

Thai Consumer Confidence At 13-Month High. Consumer confidence in Thailand rose for a fourth straight month last month, suggesting consumption may improve now that three months have passed since a military coup that halted street protests here and reduced political tensions. The consumer confidence index of the University of the Thai Chamber of Commerce rose to 80.1 last month, its highest level since July last year, from 78.2 the previous month. “The consumer confidence index has risen steadily, especially confidence in the future economy, suggesting people still have hope,” said Thanavath Phonvichai, an economics professor at the university. (Reuters)

USA

U.S. Private Sector Adds 204,000 Jobs In August. U.S. companies hired 204,000 workers in August, below what analysts had projected as well as the level set in July, a report by a payrolls processor released on Thursday showed. Economists surveyed by Reuters had forecast that the ADP National Employment Report would show 220,000 jobs added in the month. In July, 212,000 jobs were added, according to the revised data, a level that was well off the 281,000 added in June. June's reading was the strongest since November 2012. (Reuters)

U.S. Service Sector Growth Picks Up In August: ISM. The pace of growth in the U.S. services sector rose in August to its highest level since at least 2008, according to an industry report released on Thursday. The Institute for Supply Management said its services index rose to 59.6 last month from 58.7 in July, and was the highest reading since its inception in January 2008. That topped economists' forecasts for 57.5, according to a Reuters survey. While the index only dates to 2008, an examination of subcomponents with a longer track record indicate the August reading was the highest level of activity since August 2005. A reading above 50 indicates expansion in the sector. (Reuters)

U.S. Services Sector Activity Growth Eases In August: Markit. The pace of growth in the U.S. services sector dipped in August compared with the previous month, a survey showed on Thursday. The services sector Purchasing Managers Index compiled by information services company Markit slipped to 59.5 in August from 60.8 in July, but was up from the flash reading of 58.5. A reading above 50 signals expansion in economic activity. The employment component rose slightly to 52.9 in August from 52.8 in July, but it was revised downward from a 53.2 flash reading. Markit's final composite PMI, a weighted average of its manufacturing and services indexes, dipped to 59.7 in August from 60.6 in July, but was up from a flash reading of 58.8. (Reuters)

U.S. Trade Deficit Smallest In Six Months On Rising Exports. The U.S. trade deficit narrowed in July to its lowest point in six months as exports rose to a record high, supporting views of sturdy economic growth in the third quarter. The Commerce Department said on Thursday the trade gap fell 0.6% to $40.5bil, the lowest since January. June's trade deficit was revised to $40.8bil. Economists polled by Reuters had expected the deficit to widen to $42.2bil in July from a previously reported $41.5bil shortfall in June. Exports increased 0.9% to a record high of $198.0bil in July, supported by a surge in goods, automobiles, parts and engines, as well as non-petroleum products. Imports rebounded 0.7% in July to $238.6bil after declining in June. The rebound in imports is a sign of underlying strength in domestic demand. The politically sensitive trade gap with China was the highest on record in July. (Reuters)

U.S. Labor Costs Fall In Second Quarter; Productivity Revised Down. U.S. labor costs were far more weaker than previously thought in the second quarter, a government report showed on Thursday, which could give the Federal Reserve ammunition to maintain its accommodative monetary policy stance for a while. The Labor Department said unit labor costs, the price of labor for any given unit of production, fell at a 0.1% annual rate instead of the 0.6% increase reported last month. Unit labor costs had increased at a rate of 11.6% in the first quarter. Compared to the second quarter of 2013, they rose 1.7%. The Labor Department also revised its initial estimate for productivity, to show it increasing at a 2.3% annual rate in the second quarter rather than the 2.5% pace reported last month. (Reuters)

Fed Survey Highlights Widening U.S. Wealth, Income Gap. The gap between the richest Americans and the rest of the nation widened after the Great Recession, a survey by the Federal Reserve showed on Thursday, suggesting deepening U.S. income inequality. Though incomes of the highest-earners rose, none of the groups analyzed by the Fed had regained their 2007 income levels by 2013, underscoring deep scars from the financial crisis and its aftermath. From 2010 to 2013, average income for U.S. families rose about 4% after accounting for inflation, the survey showed. All of the income growth was concentrated among the top earners, the survey showed, with the top 3% accounting for 30.5% of all income. The disparity was even greater by wealth, with the top 3-percent holding 54.4% of all net worth in 2013, up from 51.8% in 2007 and 44.8% in 1989. (Reuters)

Top Us Banks Ordered To Hold More Liquid Assets. The United States Federal Reserve (Fed) moved on Wednesday to require top banks to hold more super-safe assets to reduce the possibility of a liquidity squeeze like that which devastated the industry in 2008. Under new capital rules, the largest US banks will have to keep a higher level of very liquid assets to be able to withstand a crisis situation like that of six years ago, when the government was forced to prop up cash-squeezed major banks and let hundreds of smaller institutions collapse. But the new rule could have an impact on bank earnings, because they will have a smaller portion of their assets available for more lucrative lending and investment activities. The stringent minimum liquidity coverage ratio will be applied to banks with US$250bil or more in assets, with a lower ratio set for those with more than US$50bil in assets. It is based on an international standard set by the Basel Committee on Banking Supervision. (AFP)

Europe

ECB Cuts Rates And Launches Stimulus Programme. The European Central Bank has cut its benchmark interest rate to 0.05%, and introduced new stimulus measures. The ECB had earlier cut its rate from 0.25% to 0.15% in June, and also became the first major central bank to introduce negative interest rates. It will also launch an asset purchase programme, which will buy debt products from banks. It is hoped this move will add liquidity to the financial system and revive lending. Mr Draghi also gave an update on the ECB's forecasts for the eurozone economy. The new predictions warned of slower growth, of 0.9% in 2014, and of 1.6% in 2015. Meanwhile the forecast for inflation was cut to 0.6% rising to 1.1% in 2015, and well short of the ECB's target of close to, but below, 2.0%.The central bank also cut its deposit rate, what banks pay to keep their money at the central bank, to minus 0.2% from minus 0.1%. It is hoped that this measure will encourage banks to lend to business, rather than sit on their cash. (BBC)

UK Interest Rates Held At Record Low Of 0.5%. The Bank of England has held UK interest rates at a record low of 0.5% for another month. The size of the Bank's economic stimulus programme - quantitative easing - was also unchanged at £375bn. Rates have been at 0.5% for five years, but as the economy recovers

there are expectations of a rise early next year. Last month, minutes of the Bank's interest rate meeting in early August showed that two policymakers voted for a rise. This was the first time in three years that rate-setters on the Bank's nine-member Monetary Policy Committee (MPC) had done so. (BBC)

German Factory Orders Raise Economic Hopes. The strongest monthly rise in German industrial output in over a year is an 'encouraging signal' for the economy, Germany's statistics agency has said. German industrial output rose 4.6% in July despite concerns over the Ukraine crisis, Destatis said. The economy ministry figure was much higher than many economists had forecast, and comes after a 2.7% fall in output in June. Foreign orders made up the bulk of the rise in demand, the ministry added. (BBC)

Currencies

Euro Falls Below $1.30 To Fresh 14-Month Low. The euro fell below $1.30 Thursday, continuing its losses against the U.S. dollar in the wake of the European Central Bank’s surprise decision to cut a key benchmark rate. The ECB also announced a bond purchasing program meant to bolster Europe’s tepid recovery. The moves led to the euro falling to a low of $1.2970, from $1.3150 Wednesday. Against the pound, the euro was trading at 0.7912 pound Thursday morning, down from £0.7988 late yesterday. It also fell to 136.32 yen Thursday, from ¥137.90 Wednesday. The dollar traded at 105.08 yen Thursday, up from 104.86 Wednesday evening, and nearing a fresh eight-month high. The ICE U.S. Dollar Index, a measure of the greenback’s performance against a basket of six widely-traded currencies, rose to 83.3290 Thursday, from 82.8650 Wednesday. (Market Watch)

Commodities

Oil Slips On Surprise ECB Rate Cut, EIA Data Supports. Oil slipped towards $102 a barrel on Thursday, with a surprise rate cut from the European Central Bank boosting the dollar and hitting commodities priced in the U.S. currency. Losses were limited by a drop in crude oil inventories in the United States, with data from the Energy Information Administration (EIA) showing they fell by 905,000 barrels last week. U.S. gasoline stocks dropped by 2.3 million barrels. Brent crude for October delivery fell 39 cents to $102.38 a barrel by 1509 GMT. Brent hit a 16-month low on Tuesday, before bouncing back by $2.43 on Wednesday. U.S. crude fell 79 cents to $94.75 a barrel, after settling $2.66 higher on Wednesday. (Reuters)

Gold Drops As Euro Slumps Against Dollar After ECB Moves. Gold slipped on Thursday as the euro plummeted against the dollar after the European Central Bank cut interest rates to record lows and said it would launch an asset purchase program to ward off deflation. Spot gold fell 0.4% to $1,263.66 an ounce by 2:58 p.m. EDT (1858 GMT), having earlier risen as high as $1,276.50. Among other precious metals, platinum rose 0.1% to $1,403.49 an ounce, and palladium gained 1.6% to $885.75 an ounce. Spot silver fell 0.3% to $19.08 an ounce. (Reuters)