Global

Emerging Market Firms' $18 Trillion Debt Needs Careful Watching – IMF. The IMF warned on Tuesday that emerging market firms, which together have amassed a record $18 trillion of debt, need careful monitoring as the era of record low global interest rates comes to an end. In its latest Global Financial Stability report, the fund said the biggest rises in leverage had come in "vulnerable sectors" like construction, mining and oil and gas, and were increasingly exposed to currency risk. "If rising leverage and issuance have recently been predominantly influenced by external factors (low global rates), then firms are rendered more vulnerable to a tightening of global financial conditions," the report added. (Reuters)

Traders Flee Emerging Markets at Fastest Pace Since 2008. Investors have pulled $40 billion out of developing economies in the third quarter, fleeing emerging markets at the fastest pace since the global financial crisis. The quarterly outflow was the first since 2009 and the biggest since the final three months of 2008, when traders sold $105 billion of assets, according to the Institute of International Finance. The retreat came as data signaled faltering Chinese economic growth, commodity prices slumped and the Federal Reserve moved closer to an increase in the U.S. interest rates. About $19 billion of the selloff was equities, with the remaining $21 billion in debt, the IIF said in a report Tuesday. (Bloomberg)

Malaysia

Malaysia Faces Another Bond Litmus Test. Foreign investors could pull up to another billion dollars out of embattled Malaysia's bond markets this week, pushing the country a step closer to a currency reserves crisis that would send shudders across the region. About RM11 billion ($2.5 billion) worth of government bonds are due to mature on Wednesday and foreigners, who own on average 45% of outstanding bonds, are seen likely to pull their cash out rather than re-invest it in Malaysian debt. Foreign investors became effective net sellers in July - August, after the 1MDB furor erupted. (Reuters)

Asia

India Cuts Interest Rate More Than Expected. India’s central bank Tuesday cut its key interest rate more than markets expected and for the fourth time this year amid optimism Indian inflation rates will remain low. Reserve Bank of India Governor Raghuram Rajan cut the repurchase-agreement rate by 50 basis points to 6.75%. Analysts had forecast a more modest cut of 0.25 percentage point. Mr. Rajan noted that inflation hit a nine-month low in August, and that food inflation pressures have been contained by the government’s supply-management policies. (WSJ)

India Eases Bond Curbs for Foreigners before Fed Liftoff. India relaxed curbs on foreign ownership of its debt, giving global funds more access to Asia’s best-performing bond market. The limit on foreign institutional holdings of government notes will be denominated in rupees instead of dollars and the cap will be raised in phases to 5% of outstanding debt by March 2018, the Reserve Bank of India said on Tuesday. The Finance Ministry estimates current overseas ownership is about 3.8%, and the central bank said the increase will help attract 1.2 trillion rupees ($18.2 billion) of additional investment. Rajan said the reforms will proceed even if the Federal Reserve delays increasing U.S. interest rates. (Bloomberg)

Indonesia Unveils Second Batch of Steps to Lure Investors. Indonesia on Tuesday announced a second package of economic stimulus measures in three weeks, increasing efforts to lure investment, prop up the battered rupiah and revive growth in Indonesia’s economy. The new measures include cutting the number of permits needed for mining exploration and for establishing a business in an industrial economic zone. The government will also remove value-added taxes for ships, planes and trains. (Reuters)

Vietnam’s Economic Growth Accelerates as Exports Beat Peers. Vietnam’s economic growth quickened in the third quarter, buoyed by foreign investments and exports growth that contrasts with the performance of many of its neighbors. GDP rose 6.81% in the third quarter from a year earlier, according to figures released by the Hanoi-based General Statistics Office Tuesday that complements other signs of an economic pickup. That compares with a revised 6.47% pace in the second quarter this year. Vietnam is forecast to post the strongest economic growth this year of six major Southeast Asian countries tracked by the Asian Development Bank in a recent report. (Bloomberg)

USA

Consumer Confidence Rises in September. U.S. consumer confidence rose and was higher than expected in September, according to a private sector report released on Tuesday. The Conference Board, an industry group, said its index of consumer attitudes rose to 103.0, the highest since January, from a downwardly revised 101.3 the month before. Economists had expected a reading of 96.1, according to a poll. The August reading was revised to 101.3 from 101.5. The consumer expectations index however fell to 91.0 from 91.6. Consumer expectations for inflation in the coming 12 months rose to 5.2% from 4.9% in August. (Reuters)

U.S. Home Price Growth Steady in July. U.S. single-family home prices rose in July, matching the pace of price gains in June but falling just short of expectations, a closely watched survey said on Tuesday. The S&P/Case Shiller composite index of 20 metropolitan areas in July gained 5% YoY. Economists polled had projected a 5.1% gain. Prices in the 20 cities also rose by 5% on the year in June. (Reuters)

Europe

Euro-Area Sentiment Unexpectedly Rises on Industry, Services. Euro-area economic confidence unexpectedly increased in September as sentiment in the industrial and services sectors improved. The index of executive and consumer confidence rose to 105.6 in September from a revised 104.1 in August, the European Commission said on Tuesday. Economists predicted a decline to 104.1 from a previously reported 104.2. The Commission’s report showed industrial confidence in the region increased to -2.2 from -3.7 in August as production expectations jumped. Sentiment in the services sector rose to 12.4 from 10.1 on prospects of improving demand. (Bloomberg)

German Inflation Turns Negative for First Time since January. Germany’s inflation rate unexpectedly fell below zero for the first time since January, adding downward pressure to prices in the 19-nation euro area. Consumer prices in Germany slid 0.2% in September from a year earlier, the Federal Statistics Office in Wiesbaden said on Tuesday. Economists predicted a rate of zero, according to the median of 23 estimates in a survey. Prices dropped 0.3% from the previous month. The report could spark more calls for the European Central Bank to increase monetary stimulus. (Bloomberg)

German Yields Reflect Slow Inflation Adding to Pressure on ECB. German government bond yields reached the lowest level in more than a month amid speculation that the European Central Bank’s stimulus measures won’t boost inflation toward its goal anytime soon, underpinning the case for more easy monetary policies that have been supporting prices. Germany’s 10-year bund yield rose one basis point, or 0.01 percentage point, to 0.60% as of 10:36 a.m. London time, after falling to 0.57%, the lowest since August 24. (Bloomberg)

UK Mortgage Lending Shows Biggest Increase since 2008. British mortgage lending increased by the greatest amount since 2008 after lenders approved the largest number of mortgages in more than a year and a half, adding to signs Britain's housing market is heating up. Mortgage approvals for house purchases numbered 71,030 August, beating analysts' expectations and up from 69,010 in July. Net mortgage lending, which lags approvals, rose 3.449 billion pounds in August, topping all forecasts in a poll of economists. In the three months to August, net mortgage lending increased at an annualized growth rate of 2.9%, the fastest rate since July 2008. (Reuters)

UK Consumer Confidence Dips, Hit by China, Migrant Crisis – Gfk. British consumer morale fell more than expected in September as people worried about China's economic slowdown and Europe's migration crisis, a survey showed on Wednesday. Market research firm GfK's monthly consumer confidence index slipped to +3 from +7 in August, which had matched June's figure as the highest since January 2000. Economists polled had expected a reading of +6. (Reuters)

Currencies

Dollar Slips as Commodity Currencies Steady. The U.S. dollar slipped against other major currencies on Tuesday, with volatility in global markets dulling prospects for U.S. interest rates increases. The U.S. dollar index fluttered around flat and was last off 0.15% as dealers treaded carefully ahead of Friday's U.S. jobs report, likely to confirm the relative vigor of America's labor market. The Swiss franc was flat against the dollar at 0.9726 franc per dollar. The yen was slightly firmer on the day against the dollar, trading at 119.66 yen. The euro was unchanged against the dollar and was last down 0.1% against the yen. (Reuters)

Yuan's Overnight Rate Jumps by a Record in Hong Kong to New High. An overnight rate to borrow yuan in Hong Kong jumped by a record to an all-time high as the currency’s offshore exchange rate climbed to the strongest level since an August 11 devaluation. The Hong Kong Interbank Offered Rate surged 535 basis points to 8.73%, a Treasury Markets Association fixing showed. The yuan rose as much as 0.35% to 6.3714 per dollar in the city. The currency appreciated 0.08% in Shanghai. The People’s Bank of China has been intervening in both the onshore and offshore currency markets to prop up its exchange rate in recent weeks. (Bloomberg)

Ringgit's Heads for Biggest Quarterly Loss Since 1997. Malaysia’s ringgit is headed for its biggest quarterly loss since 1997, as the relatively low level of import cover afforded by the nation’s foreign-exchange reserves makes the currency more vulnerable to an emerging-markets selloff. The currency depreciated for a sixth day and closed 0.7% lower at 4.4565 a dollar in Kuala Lumpur, according to prices from local banks. It earlier reached 4.4800, the weakest level since January 1998, and has plunged almost 16% since June 30.

Commodities

Oil Up, then Pares Gains After U.S. Inventory Build Data. Oil prices rose almost 2% on Tuesday, but then pared gains in post-settlement trade after an industry group reported a surprisingly large weekly build in U.S. crude inventories. The American Petroleum Institute (API) said U.S. crude stockpiles rose 4.6 million barrels in the week to September 25 to reach 457.8 million barrels. WTI settled Tuesday's trade at $45.23 a barrel, up $0.80, or 1.8% on the day. In post-settlement trade, it fell to $44.82. Brent finished up $0.89, or 1.9%, at $48.23. It reached $47.97 after the API data. (Reuters)

Platinum Hits 6.5-Year Low. Platinum prices fell below $900 an ounce on Tuesday for the first time since January 2009, hurt by fears that the Volkswagen emissions scandal would cut demand from carmakers, but later pared losses as bargain-hunting investors swooped in. Spot platinum was down 0.2% at $914.50 an ounce by 1835 GMT, having earlier touched a low of $894. Spot gold was down 0.3% at $1,127.80 an ounce, while U.S. gold futures for December delivery settled down $4.90 an ounce at $1,126.80. Silver was up 0.5% at $14.63 an ounce, while palladium was up 1.7% at $654.75 an ounce. (Reuters)