Malaysia

Government to Establish Special Economic Committee. A special economic committee will be established to ensure Malaysia maintains its economic growth momentum, says Prime Minister Najib Abdul Razak. He said the committee’s objective is to ensure Malaysia maintains the growth momentum that has been built since 2008, generating prosperity and higher quality of life for all Malaysians. He added that the details will be announced shortly. Najib also expressed confidence that for the period of the Eleventh Malaysia Plan, LHDN will succeed in collecting a total target of RM871 billion. (Bernama)

Government to Use Volatility Financing to Help Low-income Group. The government may introduce volatility financing to assist the low-income group own homes, said Minister in the Prime Minister's Department, Senator Datuk Seri Abdul Wahid Omar. He said the government had discussed the approach at the recent Economic Council meeting. However, the matter must be studied further before its implementation. He said the government was aware most houses built by the private sector were targeted at the higher-income group. The government provides affordable homes through the Ministry of Housing and Local Government, Syarikat Perumahan Negara Bhd and the 1Malaysia People's Housing Corp. (Bernama)

Labour Force Participation Rate Increases. The labour force participation rate for June rose slightly by 0.3% to 67.8% compared with 67.5% in the previous month, the Department of Statistics said. As of June, 13.837 million people were employed in the labour market. The unemployment rate remained stable and unchanged at 3.1% compared with the previous month. On a year-on-year basis however, the unemployment rate increased by 0.3 percentage point. (Bernama)

Asia

China Cuts Rates, Reserve Ratio. China's central bank cut interest rates and lowered the amount of reserves banks must hold for the second time in two months on Tuesday, ratcheting up support for a stuttering economy and a plunging stock market. The People's Bank of China (PBOC) said it was cutting the one-year benchmark bank lending rate by 25 basis points to 4.6%, cutting one-year benchmark deposit rates by the same amount, and reducing reserve requirements (RRR) by 50 basis points to 18% for most big banks. The government appeared to aim more at shoring up economic fundamentals than underpinning stocks. (Reuters)

Singapore Parliament Dissolved. Singaporeans will vote on September 11 to elect 89 Members of Parliament in 29 constituencies. President Tony Tan Keng Yam, on the advice of Prime Minister Lee Hsien Loong, dissolved Singapore's 12th Parliament on Tuesday. The President also issued a Writ of Election. The Writ specifies that Nomination Day is on Sep 1. The People’s Action Party (PAP) has been introducing its candidates and where they will be contesting. This is a change from previous elections, when voters only found out who was contesting in their constituency on Nomination Day. It is widely expected that the Opposition, which currently comprises nine active parties, will contest all 89 seats – the first time that this has happened since 1963. (Channel News Asia)

China Will Crack Down on Underground Banks, Stem Capital Flight. China said it would launch a three-month crackdown on underground banking to curb money-laundering and illegal funds transfers as unstable markets stoke fears of capital flight. Chinese law prohibits individuals from transferring more than $50,000 out of the country per year, but the underground banking industry has thrived in recent years as a channel to send money out of China. Vice Minister Meng Qingfeng said the transfer of some 'grey funds' through underground money shops poses a serious risk to China’s foreign exchange management and disturbs the order of financial markets. (Reuters)

China, North Korea to Open Border Trade Zone. China and North Korea will open a border trade zone in October, Chinese state media said on Tuesday, the latest effort to boost economic ties despite tension between the countries. The Guomenwan trade zone will be opened during a trade and tourism expo, the official Xinhua news agency reported, citing city officials. Xinhua said the zone has a "total investment" of 1 billion yuan ($156 million), and would enable residents living within 20 km of the border to trade with each other and get certain tax free benefits. (Reuters)

Yen’s Rapid Rise Undesirable for Economy. Japanese Finance Minister Taro Aso warned market players against pushing up the yen too much further, saying that its spike against the dollar overnight was "rough" and undesirable for the economy. He added that for the economy to grow stably, it's better for currency moves to be gradual rather than rough. The yen spiked by nearly 5% against the dollar on Monday as investors sought the Japanese currency as a safe haven. Aso said that there were no plans for now for the government to compile a fresh fiscal stimulus package. (Reuters)

USA

Consumer Confidence, Housing Data Signal Economy's Resilience. U.S. consumer confidence hit a seven-month high in August and new single-family home sales rebounded in July, suggesting underlying strength in the economy. Other data on Tuesday showed moderate gains in house prices in June, which should support consumer spending. The Conference Board said its consumer index jumped 10.5 points to 101.5 this month, the highest reading since January, amid optimism over the labor market. The share of consumers expecting an increase in incomes slipped, but fewer anticipated a decline. In a separate report, the Commerce Department said new home sales increased 5.4% to a seasonally adjusted annual rate of 507,000 units. Those sales were up 25.8% compared to July of last year. (Reuters)

Europe

Foreign Trade Drives German Q2 Growth. Foreign trade was the main driver of German economic growth in the second quarter of this year but domestic demand was a drag, data from Germany's statistics office showed on Tuesday. Seasonally-adjusted data showed that German GDP rose by 0.4% on the quarter between April and June. Foreign trade added 0.7 percentage points to GDP while domestic demand subtracted 0.3 percentage points. Gross capital investment deducted 0.1 percentage points. (Reuters)

German Business Confidence Rises. German business confidence unexpectedly rose in August as companies brushed off concerns about China’s slowdown. The Ifo institute’s business climate index climbed to 108.3 from 108 in July. The median estimate was for a decline to 107.6, according to a survey of economists. German overseas sales climbed 2.2% in the three months through June, according to data from the Federal Statistics Office in Wiesbaden. Private consumption rose 0.2%, while capital investment shrank 0.4%. The economy expanded 0.4%, matching an Aug. 14 estimate. (Bloomberg)

German Budget Surplus Stood at 1.4% Of GDP. Germany's budget surplus stood at 21.1 billion euros ($24.41 billion), or 1.4% of GDP, in the first half of 2015, the Federal Statistics Office said on Tuesday. Roughly half of the surplus came from the federal budget, which was boosted by a 4.4 billion euro windfall from the sale of mobile phone frequencies. State and local governments also registered surpluses. (Reuters)

French to Cut Government Spending to Eurozone Levels. French Economy Minister Emmanuel Macron said on Tuesday that France wants to sink government spending to average euro zone levels by 2022. He was speaking at an event with German Foreign Minister Frank-Walter Steinmeier in the German capital. France has come under pressure from the European Union and the International Monetary Fund (IMF) to cut government spending to help reduce its budget deficit. (Reuters)

German Economy Minister Not Worried About China Market Turmoil. German Economy Minister Sigmar Gabriel said on Tuesday he was not concerned by the potential impact of the latest developments in China on the German economy. He said it will not contribute to a deterioration of developments in Germany, adding positive momentum in Europe and lower oil prices were a help. Chinese stocks have tumbled on fears about the lack of policy action from Beijing in response to the downturn of the economy. (Reuters)

Currencies

Dollar Rebounds After China Rate Cut. The dollar jumped over 1% against a basket of major currencies on Tuesday as riskier assets got a boost from an interest rate cut by the Chinese central bank. The rate cut brought a relief rally, with U.S. and European shares rebounding sharply. The U.S. dollar index was last up 1.25% at 94.505. The dollar was last up 1.1% against the safe-haven yen at 119.700 yen, while the euro was last down 1.6% against the greenback at $1.14310. Against the Swiss franc, the dollar was last up 1.5% at 0.94455 franc. (Reuters)

Hong Kong's Yuan Lending Rates Hit Record High. Interbank lending rates in Hong Kong's yuan market surged to record highs on Tuesday as traders bet the Chinese currency will depreciate further, putting pressure on offshore yuan liquidity. The CNH Hong Kong Interbank Offered Rate benchmark, set by the city's Treasury Markets Association (TMA), rose to 10.1% for seven-day contracts, the highest level since the benchmark was created in June 2013. A trader in Hong Kong said investors have been betting on more yuan depreciation by borrowing yuan and converting to dollars, which has led to tightness in offshore yuan liquidity. (Reuters)

Ringgit Ends 1.12% Better Against Greenback. The ringgit closed 1.12% better to the US dollar today, snapping a 17-day losing streak, on improved risk appetite. The ringgit last stood at 4.196 against the greenback from 4.243 yesterday. Local dealers said exporters' demand for the ringgit ahead of the month-end coupled with mild demand from investors due to improved risk appetite had lent support to the local unit. The Government's announcement that it is establishing a special economic committee was seen as positive by players. A currency trader said that presumably ringgit has almost bottomed out. (Bernama)

Commodities

Oil Recovers but Still Ends Near 6.5-Year Lows. Oil rose as much as 3% on Tuesday as oversold conditions brought some buyers back to the market, but supply glut and worries about the slowing economy in China kept crude prices near 6.5-year lows. Futures of U.S. crude and Brent are both down more than 16% on the month. Brent settled up 52 cents at $43.21 a barrel, after hitting $42.23 on Monday, its lowest since March 2009. U.S. crude ended the session $1.07 higher at $39.31, advancing from $37.75, its lowest since February 2009. (Reuters)

Gold Falls as China Rate Cut Boosts Stocks. Gold fell more than 1% on Tuesday after an interest rate cut from China helped global markets rebound from the previous day's rout. Spot gold was down 1.3% at $1,139.85 an ounce at 1905 GMT, while U.S. gold futures for December delivery settled down 1.3% at $1,138.30. Spot palladium fell as much as 7.4% to $528.50 an ounce, the lowest since September 2010. Platinum was down 1.5% at $972.75 an ounce, while silver was down 0.9% at $14.65 an ounce. (Reuters)