Global

IMF's Lagarde Sees Weaker-Than-Expected Global Economic Growth. Global economic growth is likely to be weaker than earlier expected, the head of the International Monetary Fund said on Tuesday, due to a slower recovery in advanced economies and a further slowdown in emerging nations. IMF Managing Director Christine Lagarde also warned emerging economies like Indonesia to "be vigilant for spillovers" from China's slowdown, tighter global financial conditions, and the prospects of a U.S. interest rate hike. The IMF in July forecast global growth at 3.3% this year, slightly below last year's 3.4%. (Reuters)

Global Factory Growth at Two-Year Low. Global factory activity expanded at its weakest pace in just over two years last month, even though discounted prices did drive a modest upturn in new orders, a business survey showed on Tuesday. JPMorgan's Global Manufacturing Purchasing Managers' Index (PMI), produced with Markit, sank to its lowest reading since July 2013 last month, coming in at 50.7 compared to July's 51.0. August was the 33rd month the index has been above the 50 level that separates growth from contraction. But a sub-index measuring prices charged held below 50, registering 49.7, only slightly above July's 49.5. (Reuters)

Malaysia

Malaysia Manufacturing PMI at 34-Month Low. The latest reading of the Nikkei Malaysia Manufacturing Purchasing Managers’ Index (PMI) showed further deterioration in operating conditions for the domestic manufacturing sector. August headline PMI was reported at 47.2, a 34-month low and well under the 50.0 mark that separates expansion from contraction for the fifth month in a row. Factories cut back on new orders for the sixth month running with repercussions for production and purchasing activity. (See Economic Viewpoint: Malaysia Manufacturing PMI)

Government to Restrategise to Achieve Fiscal Deficit of 3.2%. The government needs to relook and restrategise its resources in order to achieve a 3.2% fiscal deficit set for this year, Deputy Finance Minister Datuk Johari Abdul Ghani said. He said there's no more business as usual because Malaysia has limited resources and exports are affected. In the first half of 2015, the country's fiscal deficit narrowed to 2.8%. He added the government needs to have a relook at their income (Petronas and other oil and gas companies). Johari encouraged industry players to use local raw materials to tide over current economic conditions. (Bernama)

Asia

Weak China August Factory, Services Point to Further Economic Slowdown. Activity in China's factory sector shrank at its fastest rate in at least three years in August as domestic and export orders tumbled. China's official manufacturing Purchasing Managers' Index (PMI) fell to 49.7 in August from 50.0 in July, the National Bureau of Statistics said on Tuesday. That was the lowest since August 2012. New orders fell to 49.7 in August from July's 49.9. New export orders contracted for an 11th straight month. Meanwhile, the Caixin/Markit services PMI showed the labor market deteriorated for the 22nd straight month in August. Employment in the services sector fell to 50.1, barely remaining in expansionary territory. (Reuters)

South Korean Exports Falter on Lower China Shipments. South Korea said exports posted their sharpest fall in six years in August as shipments slumped to China, the country’s largest export destination. South Korean exports shrank 14.7% from a year earlier in August to $39.33 billion, according to provisional data from the Ministry of Trade, Industries and Energy. The August reading missed a market expectation for a decline of 10%. Exports have been in decline for eight months in a row. Shipments to China, which absorbs a quarter of Korea’s total exports, dropped 8.8% in August from a year earlier. Exports to the Eurozone fell 20.8%. South Korea’s trade surplus narrowed to $4.35 billion.. (WSJ)

Japan April-June Business Investment up 5.6% on Year. Capital spending by Japanese firms rose 5.6% from a year earlier in the April-June period for the ninth straight YoY quarterly gain, the government said Tuesday, indicating a continued recovery in business investment. Business investment by all nonfinancial sectors for purposes such as building plants and introducing new equipment totaled 9.04 trillion yen ($75 billion), the Finance Ministry said. Capital spending by manufacturers expanded 11.6% year on year to 3.16 trillion yen for the fourth consecutive quarterly gain. (Nikkei)

Thailand Approves $3.8 Billion Stimulus. Thailand's military government has approved economic measures worth a combined 136 billion baht ($3.81 billion) aimed at boosting spending power in rural areas. The measures include soft loans via village funds worth 60 billion baht and a budget of 36 billion baht for sub-districts, Deputy Finance Minister Wisut Srisuphan told reporters after a cabinet meeting. The government will also speed up spending on small projects with 40 billion baht, he added. (Reuters)

Australia Central Bank Keeps Rates Steady. Australia's central bank kept interest rates at a record low on Tuesday in a widely expected decision ahead of GDP data that is likely to show economic growth shifted a gear lower in the second quarter. The Reserve Bank of Australia (RBA) left the cash rate at 2.0%, where it has been since May. It cemented its wait-and-see stance by repeating that it would assess upcoming economic data to judge the impact of past easings. (Reuters)

USA

U.S. Manufacturing PMI up in August at Slowest Pace Since May 2013. A strong dollar and China's economic slowdown dragged growth at U.S. factories to the lowest level since May 2013. The Institute for Supply Management reported Tuesday that its manufacturing index slid to 51.1 last month from 52.7 in July. It was the second straight drop; economists had been expecting the index to rebound modestly in August. Growth fell in U.S. factory production, employment and exports. Raw materials prices dropped for the 10th straight month. The index is down from 58.1 last August. (AP)

Europe

Eurozone Unemployment Drops to 10.9%. Unemployment in the 19-country Eurozone fell to 10.9% in July from 11.1% in June. The European Union's statistics agency, Eurostat, says Tuesday that the figure is the lowest since February 2012. The rate, however, remains at an uncomfortably high level for the currency union, with 17.5 million people out of work. The figures showed improvements in Italy, Spain and Portugal but a small increase in France, to 10.4% from 10.3%. (AP)

Eurozone Factory Growth Eases in August. Eurozone manufacturing growth eased last month, despite factories barely raising prices, adding to the European Central Bank's woes as it battles to spur expansion and inflation, a survey showed. Tuesday's disappointing readings come almost half a year after the ECB began pumping 60 billion euros a month of fresh cash into the economy. Markit's final manufacturing Purchasing Managers' Index was 52.3 last month, below an earlier flash reading that suggested it had held steady at July's 52.4. It has, however, been above the 50 mark that separates growth from contraction for over two years. (Reuters)

German Factory Activity Hits 16-Month High. Rising output and orders helped Germany's manufacturing sector expand at its fastest pace in sixteen months in August, adding to signs that exports may help fuel growth in Europe's largest economy in the third quarter. Markit's purchasing managers' index (PMI) for manufacturing, which makes up about one fifth of the German economy, rose to 53.3 from 51.8 in July. That slightly higher than a preliminary estimate of 53.2. New orders piled in at the fastest rate since April 2014, as demand came from both foreign and domestic clients. Output also increased at the fastest pace in five months. (Reuters)

German Unemployment Rate Ticks up in August. Germany's unemployment rate crept up to 6.4% in August, but the Federal Labor Agency says the job market in Europe's largest economy remains robust. The agency reported Tuesday that 23,000 more people were jobless in August over July, for a total of 2.796 million people out of work. That sent the jobless rate up 0.1 percentage points from 6.3% in July. When adjusted for seasonal developments, the number of jobless actually dropped by 7,000 for a statistically unchanged 6.4% adjusted unemployment rate for the fifth month in a row. (AP)

U.K. Manufacturing Cools as Export Orders Fall. U.K. manufacturing growth cooled in August as export orders fell for a fifth month. In its monthly factory report, Markit Economics said companies blamed the decline in foreign demand on the strong pound, weak sales in the euro area and the Chinese economic slowdown. The headline manufacturing index slipped to 51.5 from 51.9 in July. The report highlights a potential risk to Britain’s economy after net trade boosted economic growth by the most in four years in the second quarter. (Bloomberg)

French Factory Drag Intensifies. France’s manufacturing industry shrank more than initially estimated last month, leaving Germany to take a greater share of the burden of driving the euro-area recovery. Markit Economics said its Purchasing Managers’ Index for France fell to 48.3 from 49.6 in July. The report comes days before European Central Bank policy makers meet in Frankfurt, where they’ll have to grapple with the impact of China’s economic slowdown and downside risks to inflation. (Bloomberg)

Currencies

Dollar Droops as Yen, Euro Rally. The dollar sagged against the safe-haven yen and low-yielding euro on Tuesday as weak Chinese factories data drove investors to unwind bets against the two currencies widely used to fund positions in riskier assets. The dollar was last off 1.20% to 119.80 yen, having retreated from a high of 121.76 yen set late last week. The euro rose 0.70% to $1.1297, extending its recovery from last week's one-week low of $1.1156. The dollar was also down against the Swiss franc and the British pound, while the dollar index was off 0.40%. (Reuters)

Commodities

Oil Retreats More Than $5 on Weak Data. Oil prices plummeted on Tuesday, settling 8% lower, as weak Chinese data extended a roller-coaster run that knocked oil to its lowest in 6.5 years last week before frenzied short-covering fueled a 25% three-session surge. Brent crude fell $4.59, or 8.48%, to settle at $49.56 a barrel, then fell below $49 in post-settlement trade as U.S. equities deepened the day's losses to more than 3%. U.S. crude fell $3.79, or 7.7%, to settle at $45.41 following an 8.8% gain on Monday. U.S. crude fell as low as $44.15 after the API report. (Reuters)

Gold up as Dollar, Shares Fall on China Worries. Gold rose 1% on Tuesday as the dollar and global equities dropped on fresh signs of economic weakness in China and uncertainty over the timing of the Federal Reserve's first interest rate increase in nearly a decade. Spot gold rose to a session high of $1,147.16 an ounce and was up 0.6% at $1,140.50 an ounce by 1834 GMT, while U.S. gold for December delivery settled up 0.6% at $1,139.80 an ounce. Spot palladium moved sharply lower, down as much as 4.1% to $574.25 an ounce. Platinum was down 0.5% at $1,001.75 and silver was down 0.1% at $14.59 an ounce. (Reuters)