Global

OECD Trims Growth Outlook but Urges Fed Action this Week. The global economic outlook has grown darker than it was only a few months ago, but the United States is doing well enough that its central bank should go ahead with its first rate increase since the financial crisis, the OECD said on Wednesday. The world economy is set to grow 3.0% this year and 3.6% next year, the Paris-based Organisation for Economic Cooperation and Development said in an update of its forecasts for major economies. It trimmed its estimates from 3.1% and 3.8% in June, citing primarily a slowdown in emerging market economies like China and Brazil. (Reuters)

Fed Hikes May Be Bumpy for Emerging Markets – World Bank. A rise in market expectations for U.S. interest rates as the Federal Reserve starts to normalize policy could cut capital inflows to emerging markets by as much as 45%, World Bank economists said in a paper published on Tuesday. The World Bank paper said although most expected a smooth tightening cycle from the Fed, there was a risk of a substantial hit to capital flows if investors started to expect more aggressive hikes and drove up long-term bond yields. (Reuters)

Malaysia

KWAP to Liquidate Properties Abroad. In fulfilling the government’s recent measures to address the current volatility in global financial markets and economic uncertainty, the Retirement Fund Incorporated (KWAP) is working on liquidating one of its properties abroad. CEO Wan Kamaruzaman Wan Ahmad said the move was in line with its commitment to support the additional measures announced by the Prime Minister Datuk Seri Najib Tun Razak, which included the request for government-linked companies (GLCs) and government-linked investment companies (GLIC) to reinvest the income earned abroad in Malaysia. (Bernama)

Asia

Thai Central Bank Holds Rate as Government Eyes Stimulus. Thailand’s central bank kept its benchmark interest rate unchanged for a third straight meeting, putting the onus on government spending to support the economic recovery. The Bank of Thailand held its one-day bond repurchase rate at 1.5% in a unanimous decision, it said in Bangkok on Wednesday. Seventeen economists surveyed predicted the decision, while three forecast a quarter of a percentage point cut. The key rate is already close to its lowest possible level and exporters are being helped by the baht’s recent weakness, Deputy Governor Pongpen Ruengvirayudh said last month. (Bloomberg)

Indonesian August Trade Data Shows Persisting Economic Woes. Indonesia's exports and imports performed better than expected in August, but the trade numbers show persistently weak growth is for Indonesia. Exports fell 12.3% from a year earlier, less than the 17.4% drop seen in a poll and July's 18.8% skid. Imports declined 17.1%, less than the poll's forecast of 23.7% and July's 28.4% plunge. The trade surplus narrowed to $430 million from July's $1.38 billion. The poll projected an August surplus of $630 million. (Reuters)

China August Fiscal Spending Jumps 26%. China cranked up its fiscal spending by 26% in August from a year earlier as Beijing tries to re-energize flagging economic growth. The spending increase to 1.28 trillion yuan ($201 billion) last month was the biggest percentage rise in central and local government fiscal expenditure since April, when it leapt 33%, data from the Ministry of Finance showed on Tuesday. For the first eight months of the year, fiscal expenditure rose 14.8% over 10 trillion yuan ($1.57 trillion) compared with the same period last year. Still, some economists say the government's full-year economic growth target of 7.0% is now at risk. (Reuters)

Japan Output Seen Flat in 3Q on China Slowdown – BOJ. Japanese factory output will remain flat in the current quarter and an expected pick-up in October-December is clouded with uncertainty as shipments to Asia take a hit from China's slowdown, the Bank of Japan said on Wednesday. Slumping growth in emerging economies is hurting Japanese machinery makers, while electronic parts makers are suffering from weak exports of smartphone parts to China, the central bank said in a monthly report for September. (Reuters)

China Scraps Overseas Debt Quotas as Capital Outflows Worsen. China removed quotas for companies to raise funds in the overseas bond and loan markets, as it tries to staunch capital outflows. The National Development and Reform Commission, China’s top planning agency, will remove quota approval processes for foreign currency or yuan notes and loans with a term of more than one year, according to a statement on its website Wednesday. The move comes amid mounting speculation China will do more to counter the flow of money out of the nation, after yuan positions at the central bank and financial institutions fell by the most on record in August. (Bloomberg)

Vietnam’s Ruling Party Eyes Growth of 6.5% - 7.0% for 2016 - 2020. Vietnam aims to lift its growth rate over the next five years to an annual average of 6.5% - 7.0% by capitalising on multilateral trade deals, modernising agriculture and boosting investments, its communist party said on Tuesday. The ruling party, which rarely details its economic strategy, is set for a shakeup in January 2016 after a five-yearly congress that will decide who leads a low-cost manufacturing hub with high-tech ambitions. (Reuters)

S&P Raises South Korea Sovereign Credit Rating. Standard & Poor's raised South Korea's sovereign currency rating to AA-minus from A-plus, commending the strength of its economic growth, decline in short-term debt component of external borrowings, and reduced foreign indebtedness of its banks. The agency said in a statement that South Korea will maintain economic growth performance superior to most developed economies in the next three to five years. (Reuters)

S&P Downgrades Japan Sovereign Credit Rating. Ratings agency Standard & Poor's on Wednesday downgraded Japan's credit rating by one notch to A+, saying economic support for the country's sovereign creditworthiness had continued to weaken in the past three or four years. The downgrade brings its Japan rating into line with rival Moody's Investors Service, which downgraded Japan to A1 in December last year. Fitch Ratings cut its rating on Japan by one notch to A in April. (Reuters)

USA

Fed Begins Two-Day Meeting, Result Seen Too Close to Call. The Federal Reserve began a two-day policy meeting on Wednesday with economists evenly split on whether Thursday will see the first official U.S. interest rate rise since 2006. The decision by the U.S. central bank's Federal Open Market Committee (FOMC) is expected on Thursday at 1800 GMT. U.S. economic data are flashing conflicting signals, with unemployment falling but inflation subdued. In a poll of 80 economists, 45 said the Fed would keep its benchmark interest rate between zero and 0.25%, while 35 expected a hike. (Reuters)

U.S. Factory Output Declines on Sharp Drop in Auto Production. U.S. manufacturing output contracted more than expected in August, dragged down by a sharp fall in auto production that could moderate economic growth in the third quarter. American factories churned out 0.5% fewer goods last month, the Federal Reserve said on Tuesday. Analysts polled had expected a 0.3% decline in factory output. The drop, combined with a fall in mining production and higher output for utilities, left overall industrial output 0.4% lower during the month. Auto and autopart production contracted 6.4%, reversing much of the strong gains registered in July. (Reuters)

U.S. Business Inventories Edge up in July. U.S. business inventories barely rose in July, suggesting businesses were starting to scale back inventory accumulation, which could further pressure the struggling manufacturing sector. The Commerce Department said on Tuesday business inventories edged up 0.1%, the smallest rise since March. That was in line with economists' expectations. Inventories in June were downwardly revised to show a 0.7% gain after the previously reported 0.8% increase. Retail inventories excluding autos, which go into the calculation of GDP, rose 0.2% in July after increasing 0.7% in June. (Reuters)

US Consumer Prices Fell 0.1% in August. U.S. consumer prices edged down in August, marking the first decline in seven months and fueled by a big drop in gasoline prices. The Labor Department says its consumer price index slipped 0.1% in August after a small 0.1% rise in July. Core inflation, which excludes volatile energy and food costs, rose a modest 0.1% in August, indicating cost pressures remain a no-show in the economy. Over the past 12 months, overall prices are up just 0.2%, while core inflation is up a modest 1.8%. (AP)

Europe

U.K. Wage Growth Hits Six-Year High as Labor Market Tightens. U.K. wages grew at their fastest pace in more than six years and the unemployment rate unexpectedly fell, suggesting inflationary pressures are building in the labor market. Pay excluding bonuses increased an annual 2.9% in the three months through July, the most since early 2009, the Office for National Statistics said Wednesday. Total pay growth also quickened to 2.9%. The jobless rate fell to 5.5%, matching the lowest since 2008, from 5.6% in the second quarter. (Reuters)

Eurozone Inflation Falls Unexpectedly in August. Inflation across the Eurozone unexpectedly weakened in August, a development likely to fuel speculation that the European Central Bank may have to expand its bond-buying program. The annual rate of inflation declined to 0.1% in August from 0.2% July, the European Union’s statistical office said Wednesday. That marks a downward revision to Eurostat’s flash estimate of 0.2% and pushes annual inflation further away from the ECB’s target of just below 2%. (WSJ)

Eurozone Trade Surplus Hits Record High. The Eurozone’s trade surplus hit a record high in July, an indication that the weaker euro continued to support growth at the start of the third quarter by boosting exports and dampening imports. The European Union’s statistics agency Tuesday said exports of goods from the Eurozone’s 19 members exceeded their imports from the rest of the world by €31.4 billion ($35.6 billion) in July, up from €21.2 billion in the same month last year because of a 7% increase in exports and a 1% rise in imports. Eurostat said it was the largest surplus since records began in January 1999. (WSJ)

Ifo Sees German Current Account Surplus Hitting Record High in 2015. Germany's current account surplus may hit a new record of 250 billion euros ($283 billion) in 2015, the Ifo think-tank said on Tuesday, prompting grumbling elsewhere in Europe, where policymakers want Berlin to boost demand to help their export sectors. The European Commission and Washington have urged Berlin to lift domestic demand and imports to help reduce global economic imbalances and fuel global growth, including within the eurozone.

Currencies

Dollar Retreats, Weighed Down by Fall in U.S. Inflation. The dollar slid on Wednesday, as a surprise decline in U.S. inflation last month tempered expectations that the Federal Reserve would raise interest rates at this week's monetary policy meeting. In late trading, the dollar index was down 0.2% at 95.402, nowhere near the highs of 96.616 hit in early September. The euro was slightly up at $1.1275, gaining ground after earlier losses triggered by soft euro zone inflation numbers. The dollar was up 0.2% against the yen at 120.62 yen. (Reuters)

Commodities

Oil Rallies on Large U.S. Drawdown, Fed Speculation. Oil prices jumped as much as 6% on Wednesday, after the largest U.S. crude drawdown in seven months at the key delivery point in Cushing, Oklahoma fed a new round of market volatility. Oil bulls were also encouraged by doubts on whether the Federal Reserve will decide to hike U.S. interest rates on Thursday after tame August inflation data. U.S. crude settled up $2.56, or 5.7%, at $47.15 a barrel. Brent finished up $2, or 4.2%, at $49.75. (Reuters)

Gold Rises after Unexpected Drop in U.S. Inflation. Gold rallied more than 1% on Wednesday after data showing a surprise drop in U.S. inflation last month dented expectations that the Federal Reserve this week will decide to increase interest rates for the first time in nearly a decade. Spot gold was up 1.3% at $1,119.70 an ounce at 1757 GMT, while U.S. gold futures for December delivery settled up 1.5% at $1,119 per ounce. Silver prices were up 3.4% at $14.88. Platinum was up 1% at $966.49 an ounce and palladium was up 1.1% at $606 per ounce. (Reuters)