Global

Moody's Cuts 2016 Global Growth Forecasts. Credit rating firm Moody's cut its 2016 global economic growth forecasts on Friday, with China and United States both trimmed and Russia and Brazil seen staying in recession. It was a surprise move from the firm, coming just 10 days since its last forecasts. It put average growth in the top 20 world economies at 2.8% on average, versus the 3% it had forecast previously. It said the fresh cut reflected information that had become available since the earlier forecasts were published. China, Japan and Korea's growth saw downgrades partly due to expectations of more muted exports. It kept its euro zone forecast unchanged, at 1 and 2% in 2015 and 2016. (Reuters)

Malaysia

July Capital Outflows Shrink Money Supply and Liquidity. Monetary conditions deteriorated in July as outflow of portfolio capital accelerated, leading to a 1.3% MoM contraction in broad money supply. On a YoY basis, M3 growth remained in positive territory but grew just 3.9%, its lowest since January 2002. Deposits in the overall banking system was also affected by volatile financial markets and fell by 2.4% MoM as money was withdrawn from fixed deposit and investment accounts. Loan growth was stable, even performing slightly better than expected at 9.6% YoY. This lead to a wider gap between loan and deposit growth rates, which meant the loan-to-deposit ratio further increased to 89.3%. (See Economic Viewpoint: Malaysia Money & Credit)

July Domestic PPI up 0.1%. Malaysia's domestic Producer Price Index (PPI) for July 2015 rose 0.1% to 103.4, the Statistics Department said Friday. This was due to a decrease in the local production index, but it recorded an increase in the import price index of 0.4%. A year-on-year comparison showed that the PPI for the domestic economy in July decreased by 5.7%, with the local production index dropping by 8.9% and the import price index improving by 1.0%. (Bernama)

Asia

India’s GDP Growth Slowed Last Quarter. India's economic expansion decelerated to 7.0% YoY in the quarter ended June, highlighting the challenges Asia's third-largest economy faces as it tries to gain momentum. The growth in GDP was slower than the preceding quarter's 7.5% expansion and also weaker than the 7.4% average forecast by economists polled by The Wall Street Journal. The government earlier this year revised its methodology for measuring GDP, causing official readings of the last few years' growth to jump. A battery of other indicators, from trade to industrial production, however, has given the impression of an economy in only mild recovery. (Dow Jones)

Japan’s Industrial Production Unexpectedly Declines. Japan’s industrial production unexpectedly fell in July. Output fell 0.6% from June, the trade ministry said on Monday, compared with the median forecast for a 0.1% gain in a survey. Japan is struggling to recover from a contraction, as slowing growth in China weighs on exports. Production cutbacks in the electrical components and the transport equipment industries led the decline in manufacturing. Companies trimmed inventories by 0.8% in July from the previous month. Manufacturers plan to boost production by 2.8% in August and then reduce it 1.7% in September, according to a trade ministry survey. (Bloomberg)

China to Cap 2015 Local Government Debt. China's parliament approved on Saturday a cabinet plan to cap total outstanding local government debt at 16 trillion yuan ($2.5 trillion) this year, the official Xinhua news agency reported. China has long sought to deal with a mountain of local government debt - a legacy of unbridled spending during the global financial crisis. It was estimated by the audit office at 17.9 trillion yuan ($2.9 trillion) at the end of June. Outstanding local government debt stood at 15.4 trillion yuan as of the end of 2014, the agency said. (Reuters)

Myanmar Sets $2.80 Daily Minimum Wage. Myanmar has set a minimum wage of 3,600 kyat ($2.80) for an eight-hour work day, a move likely to boost investment in the fast-growing country's garment industry. The decision on a minimum wage, which follows two years of debate between garment factory owners and labor unions, was announced on Saturday. Myanmar's government has targeted garments for rapid growth. Negotiations between employers, trade unions and the government were delayed by garment workers' strikes and threats from garment factory. (Reuters)

USA

Consumer Spending in U.S. Rose in July as Wages Picked Up. Consumer purchases climbed in July as incomes grew. The 0.3% advance matched the prior month’s gain, a Commerce Department report showed Friday. The median forecast in a survey of 77 economists called for a 0.4% increase. Wages rose by the most this year. Steady hiring, cheap gasoline, rising home-equity and low borrowing costs are underpinning demand and helping shield the U.S. from global weakness. Total incomes rose 0.4% in July for a fourth month. Wages and salaries increased 0.5%, the biggest gain since November. (Bloomberg)

Rate Hike Next Month Hinges on Market Volatility. The Federal Reserve on Friday left the door open to a September interest rate hike even while several U.S. central bank officials acknowledged that turmoil in financial markets could delay the policy tightening. Top policymakers including Fed Vice Chairman Stanley Fischer, said recent volatility in global markets could quickly ease and possibly pave the way for the U.S. rate hike. Fischer, a close ally of Fed Chair Janet Yellen, said he thinks the volatility could settle fairly quickly. St. Louis Fed President James Bullard also said he still favored hiking rates next month. The comments suggest the next two and a half weeks will be critical for the Fed. (Reuters)

Fischer: 'Good Reason' to Think U.S. Inflation Will Move Higher. The Federal Reserve's No. 2 official said there is "good reason" to think U.S. inflation will firm and move toward the U.S. central bank's 2% annual target, touching on a significant assessment facing the Fed ahead of its September policy meeting. Fed Vice Chairman Stanley Fischer said Saturday that inflation will move higher as the forces holding inflation down-oil prices and import prices dissipate further. He said the average monthly nonfarm payrolls growth of 235,000 in the past three months is well above the amount needed to continue the strengthening of the labor market. He also said that because monetary policy influences real activity with a substantial lag, the country should not wait until inflation is back to 2% to begin tightening. (Nikkei)

U.S. Consumer Sentiment Falls. U.S. consumer sentiment fell in August, a survey released on Friday showed. The University of Michigan's final August reading on the overall index on consumer sentiment came in at 91.9, down from 93.1 in July. It was lower than the survey's preliminary reading of 92.9. The final reading was the lowest since May and was below the median forecast of 93.0 among economists polled by Reuters. (Reuters)

Europe

Eurozone Inflation Steady in August. Annual inflation in the Eurozone was the same in August as in July, defying economists' expectations of a slowdown, as rising prices of unprocessed food and services offset the downward pull from cheaper energy. European Union statistics office Eurostat said Eurozone prices rose 0.2% YoY this month, the same as in July and more than the 0.1% forecast in a poll. Cheaper energy was the biggest factor lowering the overall index, with energy prices 7.1% lower than in August 2014. (Reuters)

Eurozone Sentiment Edges to Four-Year High. Confidence in the Eurozone's economy edged up to a new four-year high in August as rising domestic demand marginally outweighed a worsening view of export prospects and the mood brightened particularly in France and Spain. The European Commission's monthly economic sentiment indicator, published on Friday, rose to 104.2 in August, from 104.0 in July, against expectations in a poll of a slight dip to 103.8. Overall economic sentiment increased in France (+0.9) and Spain (+1.7), but declined in Germany (-0.2), Italy and in the Netherlands. (Reuters)

German Retail Sales Surge. German retail sales recorded their strongest first-half increase in at least 20 years, data showed on Friday. The 2.5% gain in shopping activity in real terms from January to June was the largest rise on record, data from the Federal Statistics Office showed on Friday. An official said it was the highest first-half increase since the office began releasing that data in 1994. Shopping activity soared by 5.1% on an annual basis as Germans spent more on textiles, cosmetics, medicines and other items like books and jewellery. (Reuters)

Switzerland Unexpectedly Dodges Recession. Switzerland avoided a recession last quarter as investment and private consumption helped return the economy to growth. GDP increased 0.2% in the three months through June, after a contraction of 0.2% in the previous quarter, the State Secretariat for Economic Affairs said on Friday. Economists forecasted a 0.1% contraction. Since the Swiss National Bank scrapped its currency ceiling, consumer prices are slumping and exporters’ margins are being squeezed. (Bloomberg)

Second-Quarter UK Growth Steady at 0.7%. UK economic growth for the second quarter of the year was unrevised at 0.7%, official figures have shown. The initial figure released in July was boosted by a sharp rise in oil and gas production. As expected, the Office for National Statistics (ONS) on Friday made no change to the reading for the three months to June. It was higher than the 0.4% growth recorded for the first quarter of the year. Net trade boosted GDP by one percentage point in the second quarter as exports jumped. Business investment rose 2.9% compared with the first three months of 2015 - the highest figure in a year. (BBC)

U.K. Export Surge Drives Economy to 10th Quarter of Growth. U.K. exports picked up in the second quarter, helping trade contribute to the economic expansion by the most in four years. Exports rose 3.9% from the previous three months, while imports gained just 0.6%. GDP increased 0.7% in the period, including a 1 percentage-point addition from net trade, the Office for National Statistics said in London on Friday. Consumer-spending growth eased slightly to 0.7% and government expenditure held at 0.9%. Business investment increased 2.9% on the quarter, the most in a year, and was up 5% from a year earlier. The report suggests that the rebalancing of the economy may be starting. Exports surged 8.1% from a year earlier, the most in four years. (Bloomberg)

Currencies

Dollar Drops Vs Yen and Euro. The dollar lost ground against the safe-haven yen and the low-yielding euro on Monday as global stock markets began the week in the red, prompting investors to trim bets against currencies popularly used to fund risky carry trades. The dollar index was down 0.15% on the day at 95.970, and 1.4% lower for the month. The dollar shed 0.4% to 121.25 yen, down about 2.2% for August, but well above a seven-month low of 116.15 touched a week ago. The euro rose 0.2% to $1.1210, below last week's high of $1.1715 but still up 2.4% for the month. (Reuters)

Commodities

Oil Jumps 8%. Oil futures soared on Monday for a third consecutive day, rising more than 8%, as a downward revision of U.S. crude production data and OPEC's readiness to talk with other producers helped extend the biggest three-day price surge in 25 years. The three-day gains were more than the 20% mark that often signals a bull market. Brent futures rose $4.10, or 8.2%, to settle at $54.15 a barrel. U.S. crude gained $3.98, or 8.8%, to settle at $49.20 a barrel, taking three-day gains to 27.5%, the most over three days since August 1990. (Reuters)

Gold Rebounds on Oil Rally. Gold steadied on Monday, bouncing up from session lows as oil prices rallied and the U.S. dollar fell. Spot gold was up 0.04% to $1,134 an ounce at 1920 GMT, and was on track to close August up 3.5%, the strongest monthly gain since January. This lifted prices above 5.5-year lows reached in July. U.S. gold futures for December delivery settled down 0.1% at $1,132.50. Spot palladium rose for the third straight session, up 2.2% to $596.50. Silver rose 0.3% to $14.63 an ounce, while platinum dropped 1.1% to $1,004.75. (Reuters)