Malaysia

BNM Forex Reserves Fell US$2.2b in 1H of Aug as BNM adopts new strategy. Malaysia’s foreign reserves fell by US$2.2b in the 1H of August compared to US$3.8b in the 2H of July and US$5.0b in the 1H of July. As at mid-August, the international reserves held by Bank Negara totalled US$94.5b (RM356.4b). The smaller decline in reserves in the 1H of August compared to July may have reflected further degree of easing of BNM’s forex intervention. The current reserves level is sufficient to finance 7.5 months of retained imports and is 1.0 times the redefined short term external debt. (See Economic Viewpoint: BNM Forex Reserves)

Asia

Key Chinese Manufacturing PMI Falls to 77-Month Low. China's manufacturing contracted by an unexpectedly large margin this month, a survey showed Friday. The preliminary version of the Caixin purchasing managers' index fell to a 77-month low of 47.1 in August from July's 47.8 on a 100-point scale. That was weaker than most analysts expected. Output, new export orders and employment all declined at faster rates than in July. The preliminary figure is based on responses from 85% to 90% of companies surveyed for the index. (AP)

Japan August PMI Shows Fastest Expansion in Seven Months. Japanese manufacturing activity expanded in August at the fastest pace in seven months as domestic orders rose, a survey showed on Friday. The Markit/Nikkei Japan Flash Manufacturing Purchasing Managers Index (PMI) rose to a seasonally adjusted 51.9 in August from a final 51.2 in July. The index for new orders rose to a preliminary 53.2 from a final 50.9 in the previous month. This suggests domestic demand is gaining strength. However, the flash index for new export orders fell to 50.5 from 52.2 in the previous month, suggesting overseas demand is losing momentum as China's economy slows. (Reuters)

South Korea Q2 Real Household Income Grows. South Korea's average disposable household income grew a real 2.5% in the second quarter from a year earlier, the fastest growth since the first quarter of last year, official data showed on Friday. It was up from a real 2.4% annual gain in the average household disposable income during the January-March period this year and the fastest since a 3.9% rise in the first quarter of 2014, the Statistics Korea data showed. It bodes well for the prospects of consumer spending in South Korea after private consumption posted a rare decline of 0.3% in the second quarter from the previous period in real terms. (Reuters)

ASEAN Looks to Upgrade Free Trade Deals. Asean will upgrade its free trade deals with China, Japan and South Korea as the region looks to its East Asian partners for a boost amid current external economic uncertainties. International Trade and Industry Minister Datuk Seri Mustapa Mohamed said Asean had existing free trade agreements (FTAs) with each of the three countries but would like to upgrade them to spur trade growth. “The FTA upgrades will be comprehensive and cover many areas, including goods, services and investments,” he said after chairing the Asean Economic Ministers Consultation sessions with Japan, South Korea and China. Last year, total trade between Asean and China stood at US$366.5bil (RM1.53 trillion), while with Japan, the figure recorded was US$229bil (RM957bil). (The Star)

Australia to Have GST for Overseas Online Purchases. Australia's Treasurer Joe Hockey has announced a 10% GST will apply to all overseas online purchases from July 2017. Hockey said this will ensure that there is a fair and equal treatment of all goods and services. He added that this will deliver competitive neutrality for Australian businesses. (Bernama)

USA

Indicator of Factory Activity Slows in August. Growth in the U.S. manufacturing sector slowed to its weakest pace in almost two years in August, according to an industry report released on Friday. Financial data firm Markit said its preliminary U.S. Manufacturing Purchasing Managers' Index fell to 52.9 in August, its lowest since October 2013, from a final July reading of 53.8. Economists had forecast the August figure would be 54.0. Job creation also slowed in August, with the index at 52.2, its weakest since July 2014, down from a final July reading of 53.8. The index's output component fell to 53.7, its lowest since January 2014, from the July final reading of 55.3. (Reuters)

Europe

Eurozone Economy Resilient in Face of Greece. The 19-country Eurozone economy was resilient in the face of the recent crisis in Greece. Financial information company Markit said its purchasing managers' index for the Eurozone rose to 54.1 points in August from 53.9 the previous month. Markit estimates the economy to be growing at a quarterly rate of 0.4%, slightly ahead of the 0.3% recorded in the second quarter. The increase was largely due to a pick-up in Germany and in some of the countries that have been at the forefront of the region's debt crisis. (AP)

German Manufacturing PMI Strengthens. German manufacturing growth unexpectedly accelerated to the fastest pace in more than a year. Markit Economics said Friday that its factory Purchasing Managers’ Index advanced to 53.2 in August from 51.8 in July. That’s the highest since April 2014 and above the 50 mark that divides expansion from contraction. It also beat the median estimate of 51.6 in a survey of economists. A services gauge slipped, though a composite measure of both industries rose to a four-month high. The improvement in Germany is in contrast to France, where the economy stagnated in the second quarter. (Bloomberg)

German Consumers Starting to Worry About Economy. A closely-watched survey indicates German consumers are beginning to worry more about the country's economic situation but remain optimistic overall. The GfK research group said Friday that its forward-looking consumer climate index dropped to 9.9 points for September from 10.1 points in August. The survey of 2,000 consumers showed drops in all sub categories, with economic expectations, income expectations and willingness to buy all falling. However, GfK said the indicator remains high. (AP)

U.K. Posts First July Budget Surplus for Three Years. Britain recorded its first July budget surplus since 2012 as income tax and revenue from property purchases hit records for the month. Revenue exceeded spending by 1.3 billion pounds ($2 billion) compared with a deficit of 100 million pounds a year earlier, the Office for National Statistics said on Friday. Economists in a survey had forecast a 1.1 billion-pound surplus. Government income rose 3.9% and spending climbed 3.4%. The public finances get a boost in July as quarterly taxes on corporate profits pour in along with payments from oil companies and self-employed workers. (Bloomberg)

Currencies

Dollar Slumps 1% as China Worries Muddy U.S. Rates Outlook. The dollar tumbled more than 1% against the euro and the yen on Friday as strikingly weak Chinese factory data fanned global growth worries and cooled betting that the Federal Reserve will raise U.S. interest rates next month. The euro was last trading against the dollar at $1.1358, up 1.05%. Earlier the euro hit a session high of $1.1375, last touched on June 22. The dollar index of major currencies traded against the greenback was down for a third day and was last off 1% to levels last seen on June 30. Against the yen, the dollar fell to its weakest in six weeks, down 1.10% on the day at 122.28 yen. (Reuters)

Commodities

Oil Ends Week Down More Than 2%. U.S. oil prices traded below $40 a barrel for the first time since the 2009 financial crisis, ending 2% lower on Friday on signs of U.S. oversupply and weak Chinese manufacturing and notching the longest weekly losing streak in almost three decades. U.S. crude settled $0.87, or 2.1%, lower at $40.45 a barrel, having touched a new 6-1/2-year low of $39.86 a barrel. Brent oil ended $1.16, or 2.5%, lower at $45.46 a barrel. It hit a low of $45.07 and threatened to break below $45 a barrel for the first time since March 2009. (Reuters)

Gold Set for Biggest Weekly Rise Since January. Gold rose in choppy dealings on Friday, hitting a six-week high as more bad economic data from China rattled financial markets, pushing the U.S. dollar broadly lower. Spot gold hit a peak of $1,168.40 an ounce and was up 0.5% at $1,158.31 at 1839 GMT, up 4% on the week. U.S. gold futures for December delivery settled up 0.6% at $1,159.60. Silver was down 1.7% at $15.29 an ounce, platinum was down by 0.8% at $1,020.75 and palladium was down 2.7% at $601.25. (Reuters)