Global

IMF Head Sees Cut to Global Growth Forecasts - Les Echos. The IMF is likely to revise downwards its estimates for global economic growth due to slower growth in emerging economies, IMF head Christine Lagarde said in a newspaper interview. She said emerging countries are slowing down and developed countries are seeing their momentum accelerate. "A forecast of 3.3% growth this year is no longer realistic. A forecast of 3.8% for next year neither. We will however remain above the 3% threshold," she said. The IMF is due to release updated economic forecasts in October. (Reuters)

Malaysia

1MDB Dollar Bonds Slump to Record as U.S. Probes Hurt Sentiment. 1MDB’s dollar bonds fell to a record as a plunge in the ringgit pushes up financing costs for the debt-ridden state investment company under investigation in the U.S. Data shows the $3 billion of outstanding 4.4% notes maturing in 2023 were paying 75 cents on the dollar as of 0619 GMT in Kuala Lumpur, a drop of 4.7% from last week. The yield on 1MDB’s dollar notes rose 81 basis points this week to 9.15%, the highest since the debt was sold in March 2013. Of 1MDB’s total borrowings of $8.13 billion, about 68% are denominated in dollars, according to data compiled. (Bloomberg)

CDS Spread Doesn't Reflect Economy's Strong Long-term Fundamentals – Treasury. The government will continue to monitor external developments and brace itself for any eventuality by ensuring that it has sufficient policy options to mitigate adverse impacts on the country, Treasury Secretary General Tan Sri Dr Mohd Irwan Serigar Abdullah said Saturday. The government is aware that Malaysia's credit default swap (CDS) spreads have been volatile and widened recently. He said the CDS spreads respond to immediate market news and thus the recent movements do not reflect Malaysia's underlying economic strength. Moody's currently rates Malaysia at A3 with a positive outlook. (Bernama)

Asia

Japan Consumer Prices Fall for First Time Since Launch of BOJ Stimulus. Japan's core consumer prices marked the first annual drop since the central bank deployed its massive stimulus program more than two years ago. While the data will keep alive market expectations of further easing, key cabinet ministers signaled their reluctance to offer more monetary or fiscal support. The core consumer price index, which includes oil but excludes volatile fresh food costs, fell 0.1% in August from a year earlier after flat growth in July, official data showed on Friday, matching a median market forecast. (Reuters)

Japan Government Cuts Outlook, Highlights Risks from China, U.S. Fed. Japan's government lowered its economic assessment and highlighted risks posed by China and a U.S. interest rate hike, adding to signs that a shock from overseas could hurt Japan's outlook. The Cabinet Office said in its September report that Japan's economy was on track to recover but acknowledged some parts of the economy had slowed, striking a less optimistic tone as consumer spending, exports and capital expenditure proved disappointing. The last time the Cabinet Office downgraded its assessment was in October last year. (Reuters)

Japan's Abe Signals Readiness to Offer Fiscal Stimulus. Japanese Prime Minister Shinzo Abe said on Friday he was ready to respond flexibly to any downturns in the economy with additional policy measures, including further fiscal stimulus. He also stressed that achieving strong economic growth would remain the top priority for his administration. Abe's key cabinet ministers, including Finance Minister Taro Aso, have ruled out another fiscal stimulus package to support a fragile economic recovery. But many analysts expect the government to offer additional fiscal stimulus to spur growth. (Reuters)

China Capital Outflows Hit Record in August on Yuan Weakness. Money is leaving China faster than ever, according to a gauge tracking capital flows. Data shows an estimated $141.66 billion left China in August, exceeding the previous record of $124.62 billion in July. A potential source of outflow may come from Chinese companies reducing foreign-exchange liabilities by repaying debt in other currencies and taking advantage of lower domestic funding costs. A Federal Reserve interest rate increase would likely boost the value of the dollar, making debt denominated in the currency more expensive to repay. (Bloomberg)

Singapore's Weak August Factory Output Raises Chances of Central Bank Easing. Singapore's industrial production shrank more than expected in August, increasing chances of a technical recession and the central bank easing monetary policy further when it meets next month. Manufacturing output contracted 7.0% in August from a year earlier, data from the Economic Development Board showed on Friday, weaker than the median market forecast for a 5.0% decline given by a survey of analysts. Industrial production fell 3.7% from the previous month on a seasonally adjusted basis. (Reuters)

Vietnam’s Inflation Dwindles to Zero in Major Turnaround. Vietnam's monthly inflation rate dwindled to zero this month, according to official figures, a dramatic turnaround for the communist country which once battled hyperinflation. YoY consumer price inflation was zero in September, the lowest reading in almost a decade, the General Statistics Office (GSO) said in a statement on Thursday. MoM consumer prices decreased 0.21% in September, it added. Vietnam has suffered from runaway inflation, with rates as high as 28.3% as recently as August 2008. (AFP)

Americas

Economy Grew at 3.9% Rate in April-June Quarter. The U.S. economy grew at an even faster clip in the spring than previously estimated. The overall economy expanded at an annual rate of 3.9% in the April-June quarter, up from a previous estimate of 3.7%, the Commerce Department reported Friday. The new-found strength came from additional gains in consumer spending, business investment and residential construction. While economists believe growth in the third quarter has slowed to around 2.2% to 2.5%, they expect a modest acceleration in activity for the final three months of this year. (AP)

U.S. Consumer Sentiment Eases in September. U.S. consumer sentiment worsened in September, a survey released on Friday showed. The University of Michigan's final index for September on overall consumer sentiment fell to 87.2, compared with 91.9 in August. This month's final number was slightly better than the median forecast of 86.7 among economists polled. The survey's barometer of current economic conditions dropped to 101.2 from 105.1 in August. The survey's gauge of consumer expectations fell to 78.2 in September from 83.4 in August, but was marginally higher than the expected 77.0. (Reuters)

U.S. Services Sector Growth in September Slows to Three-Month Low – Markit. Growth in America's services sector eased during September to its slowest rate during the last three months as new business expansion weakened for a second month, an industry report showed on Friday. Markit said its preliminary reading of its PMI for the services sector slipped to 55.6 in September from the final 56.1 reading in August. The data matched the 55.6 level forecast by economists in a survey. A subindex measuring new business at service companies declined to 55.3, its lowest level since January, from the reading of 55.7 in August. The employment component slipped in September from August. (Reuters)

Hard to Make Case for October Hike - Fed's Bullard. St. Louis Federal Reserve President James Bullard said on Friday it is not clear if other policymakers will have enough new data by October to support a rate hike. Bullard is the second Fed official this week to suggest there may not be enough information by the October meeting for the Fed to change course after holding fire in September. Atlanta Fed President Dennis Lockhart said that an October timetable was "tight" for him to resolve questions he has about the fallout for the U.S. from things like the Chinese economic slowdown. (Reuters)

Brazil Ramps up Real Support, Sees Reserves as Last Resort. Brazil's central bank says it might dip into its dollar reserves to support its tumbling currency but people who work closely with the bank say it will use other tools until it sees dollars leaving the economy. The central bank has been able to carry out those operations without dipping into $371 billion of foreign reserves, but faces mounting calls to start selling some of those dollar stockpiles. Central bank chief Alexandre Tombini said that reserves were an insurance policy that may and should be used. The real rebounded sharply on his comments. (Reuters)

Europe

Eurozone Lending Inches up but Money Supply Growth Slows. Lending to Eurozone households and corporations inched up in August but the pace of growth in money circulating in the euro zone slowed, striking a cautious note on future economic activity, European Central Bank data showed on Friday. Loans to households and non-financial corporations respectively grew by 1.0% and 0.4% YoY in August, or 10 basis points faster than July's figure. Growth in M1 money supply eased to 11.4% YoY from 12.2% in July, its first significant slowdown in 15 months. The broader M3 indicator grew by 4.8% compared to 5.3% in the previous month. (Reuters)

Currencies

Dollar Gains after Yellen Comments, U.S. Data Support Fed Rate Hike. The U.S. dollar hit its highest in over five weeks against a basket of major currencies on Friday, a day after Federal Reserve Chair Janet Yellen said she expected the central bank to hike rates in 2015, and after U.S. growth data appeared to support such a move. The euro was last down 0.35% against the dollar at $1.11910. The dollar was up 0.37% against the yen at 120.550 yen. The dollar was up 0.47% against the franc at 0.97985 franc. The dollar index was last up 0.26% at 96.230. (Reuters)

Ringgit Losses Throw Back to 1998 as 1MDB Probes Spread to U.S. Malaysia’s ringgit headed for its biggest weekly decline since a dollar peg was imposed in 1998 and bonds plunged as investigations into 1MDB spread to the U.S., exacerbating losses driven by a slowdown in China and tumbling commodity prices. The currency weakened beyond 4.38 against the greenback on Friday for the first time since the Asian financial crisis prompted Malaysia’s central bank to implement capital controls. 1MDB is being probed by the U.S. FBI over money laundering, the Wall Street Journal reported. (Bloomberg)

Commodities

Oil Up after Wall Street Rally, Drop in U.S. Rigs. Oil prices rose for the second straight day on Friday, supported by a rally on Wall Street and a lower U.S. rig count, although the decline in drilling was the smallest in four weeks. Crude futures posted stronger gains for the week. Brent settled up $0.43, or 0.9%, at $48.60 a barrel. It rose almost $1 at the session high. U.S. crude settled up $0.79, or 1.8%, at $45.70. For the week, both Brent and U.S. crude were up about 2%. (Reuters)

Gold Eases as Yellen Remarks on Rates Boost Dollar. Gold fell from one-month highs on Friday after Federal Reserve Chair Janet Yellen kept the door open to an increase in U.S. interest rates this year, sparking a dollar rally. Spot gold was down 0.5% at $1,148.6 an ounce at 1941 GMT, having climbed 2.1% on Thursday, its biggest one-day rise since January. U.S. gold futures for December delivery settled down 0.7% at $1,145.6. Silver was down 0.3% at $15.12 an ounce, while platinum dipped 1.18% at $951.25 an ounce. Palladium was up 0.84% at $665 an ounce, off a nearly 12-week high at $674.50. (Reuters)