I. Yesterday's News
International News
1. The dollar weakened, U.S. Treasury prices gained, and the S&P 500 closed slightly higher on Friday, with tensions simmering on the Korean peninsula and as the boost from heightened expectations of a U.S. interest rate hike in December faded. North Korea said on Friday it might test a hydrogen bomb over the Pacific Ocean after President Donald Trump vowed to destroy the reclusive country, with  promising to make Trump pay dearly for his threats. A senior U.S. official said that the United States is taking North Korea leader Kim Jong Un's threat seriously. Such a test would be a “game-changer” if North Korea actually test a hydrogen bomb over the Pacific Ocean, the official said. U.S. Secretary of State Rex Tillerson on Friday acknowledged that escalating tensions with North Korea were challenging but said diplomatic efforts will continue.

2. British Prime Minister Theresa May failed to give any concrete details for how Britain might retain preferential access to Europe's single market. In a closely watched speech in Italy, May said Britain should stay in the trade bloc during a roughly two-year transition out of the European Union, and offered concessions on a divorce deal as she appealed for a revival of Brexit negotiations. The EU's Brexit negotiator Michel Barnier praised May's speech for a "constructive spirit" in divorce talks with the EU, but said he needed more clarity.
Moody's downgraded the United Kingdom's long-term issuer rating to Aa2 and changed the outlook to stable. Moody's believes that the UK government's decision to leave the EU Single Market and customs union as of 29 March 2019 will be negative for the country's medium-term economic growth prospects. More importantly for the UK's credit profile, Moody's does not expect growth to recover to its historic trend rate over the coming years. Britain's government said Moody's assessment of the Brexit hit to the economy was "outdated".

3. Major producers meeting in Vienna said they may wait until January before deciding whether to extend output curbs beyond the first quarter. "I believe that January is the earliest date when we can actually, credibly speak about the state of the market," Russian Energy Minister Alexander Novak said after the Organization of the Petroleum Exporting Countries and other major producers finished meeting. Other ministers said a decision on extending cuts could be taken in November when OPEC holds its next formal meeting.

4. Kansas Federal Reserve Bank President George said he is 'gratified' that balance sheet plan met with muted market reaction. U.S. central banker John Williams said he does not expect any market turbulence as the Fed gets underway with reducing the huge balance sheet. Dallas Federal Reserve Bank President Robert Kaplan said he remains “open-minded” on a December rate increase but remains concerned current weak inflation may be the result of hard-to-counter structural trends.

5. U.S. Flash Markit Purchasing Manager's Index (PMI) in manufacturing sector rose to 53.0 as expected in September from 52.8 last month. U.S. Flash Markit PMI in service sector fell to 55.1 in September from 56.0 last month. It is also lower than Reuters' forecast of 55.9.
Canada's inflation rate picked up 0.1 percent in August from the previous month. The annual inflation rate rose to 1.4 percent. The core inflation remained unchanged in August compared with the previous month, but rose 0.9 percent year-on-year. Data released showed overall retail sales rose 0.4 percent to 49.13 billion yuan.
The CBI's factory order book balance slipped this month to +7 from +13 in August. It is the lowest figure since April.

6. Indonesia's central bank on Friday cut its main interest rate by 25 basis points to 4.25 percent for the second consecutive month, as it seeks to support sluggish lending and consumption holding back growth in Southeast Asia's biggest economy.

7. Ratings agency Fitch revised its outlook on Russia's long-term foreign- and local-currency issuer default ratings to positive from stable, affirming Russia's rating at "BBB-".

Domestic News
8. China's credit rating has been downgraded by Standard & Poor's amid fears rising debts are adding to economic and financial risks. The agency lowered China's sovereign rating by one notch to A+ from AA-, pointing to the “prolonged period of strong credit growth” raising the prospect of economic and financial risks to the country. The downgrade from S&P brings its rating in line with assessments from Moody's, which lowered its rating for the country in May. China's Finance Ministry on Friday criticized the cut in the S&P's credit rating on Chinese government borrowing as a "wrong decision" and said it ignores the country's economic strength.

9. Standard & Poor downgraded China's credit rating a day after the rating agency said China's efforts in reining risk in rising debt is not as effective as expected. Investment banks said the change is a wrong decision, neglecting China's good fundamentals and development potential." But CICC said this downgrading may prompt China to pay more attention to the problem of low efficiency in China's economy, and the necessity of accelerating reform.

10. S&P followed its China downgrade a day later by cutting its credit rating for Hong Kong. The agency said Friday it was reducing its long-term rating on Hong Kong by one notch, to AA+ from AAA.

11. China's mortgage rate for first-time home buyers rose to a record high of 5.12 percent, breaching the key mark of 5 percent for the first time since 2016, Rong360 said.

12. Chinese oil refineries are gearing up to receive more Russian oil transported through an expanded Siberian pipeline network from January, likely cementing Russia's position as China's largest oil supplier in a close race with Saudi Arabia.

13. Shenzhen-listed Leshi Internet Information and Technology Corp, announced late Thursday that it has sent a notice to LeEco founder Jia Yueting, reminding and asking him to fulfill his loan commitment to the company.

II. Market Overview
FX
1. Global Market
The dollar weakened against the yen on Friday, with tensions simmering on the Korean peninsula and as the boost from heightened expectations of a U.S. interest rate hike in December faded. The dollar was down 0.42 percent at 111.99 yen, on pace to snap a five-day winning streak against the Japanese currency. The dollar index, which tracks the greenback against six major currencies, was down 0.13 percent to 92.136. Meanwhile, sterling skidded against the dollar and the euro after British Prime Minister Theresa May failed to give any concrete details for how Britain might retain preferential access to Europe's single market. Sterling was down 0.32 percent against the greenback at $1.3534, after falling as low as 1.349. The euro inched up 0.07 percent to $1.1947, with traders not seeing Sunday's German elections as a source of risk. Chancellor Angela Merkel is widely expected to win a fourth term in power.
2. Home Market
China's yuan pared most gains against the dollar after opening sharply higher, while the official yuan midpoint snapped a three-day losing streak. A correction in the overnight dollar gave a boost to yuan at the opening. But forex-buying rushed in after Standard & Poor's downgrade of China's credit rating lowered market expectations for yuan's appreciation from Chinese government, erasing yuan's gains.

Precious Metals
Gold edged up from the previous day's four-week low on Friday as the dollar fell and investors sought a safe haven from geopolitical uncertainty caused by rising tensions between North Korea and the United States. Spot gold was up 0.36 percent at $1,295.71 per ounce by 1829 GMT. Gold fell 1.5 percent for the week, the largest weekly loss since early July. U.S. gold futures for December delivery settled up $2.70, or 0.21 percent, at $1,297.50 per ounce.

Commodities
1.Crude Oil
Oil prices ended nearly 1 percent higher on Friday, close to their highest levels in months, as major producers meeting in Vienna said they may wait until January before deciding whether to extend output curbs beyond the first quarter. Brent crude rose 43 cents, or 0.8 percent, to settle at $56.86, a penny shy of the session high which was also the highest since March. U.S. West Texas Intermediate (WTI) crude settled at $50.66 a barrel, up 11 cents or 0.2 percent, within a few cents of its May peak. For the week, Brent posted a gain of 2.2 percent, while WTI was up 1.5 percent.

2.Base Metals
Nickel slid 5 percent to a five-week low on Friday after trading fees were raised in China to dampen speculation and steel prices dropped with other metals as investors shunned risky assets after more North Korean tensions. Benchmark LME nickel was the biggest decliner in London, closing down 5.3 percent at $10,420 a tonne, the weakest since Aug. 16. The weekly loss of 6 percent was the biggest weekly decline in six months. Three-month copper fell to its lowest since Aug. 16, touching $6,366 a tonne, before trimming losses to finish at $6,457, down 0.4 percent.

U.S. Treasuries
1. U.S. Bonds
U.S. Treasury prices gained on Friday on global concerns about North Korea after it said it might test a hydrogen bomb over the Pacific Ocean, and as investors closed positions before the weekend. Benchmark 10-year notes gained 7/32 in price to yield 2.26 percent, down from 2.28 percent on Thursday. The yield curve between five-year notes and 30-year bonds flattened to 91.1 basis points, the lowest level since late 2007, before steepening back to 92.3 basis points.

2. Chinese bonds
China's future and cash bonds rebounded in the morning session on Friday, shrugging off the news that Standard & Poor's downgraded China's credit rating. Cash bond yields slipped 1-2 bps in interbank bond market.

Stock Market
1. U.S. Equities
The S&P 500 closed slightly higher on Friday even though Apple was a drag, as worries about Washington's latest healthcare legislation proposal eased and investors shrugged off concerns about North Korea. Investors in the broader market were also encouraged by a jump in the Russell 2000 small-cap index, which ended with a record high close. The Dow Jones Industrial Average fell 9.64 points, or 0.04 percent, to 22,349.59, the S&P 500 gained 1.62 points, or 0.06 percent, to 2,502.22 and the Nasdaq Composite added 4.23 points, or 0.07 percent, to 6,426.92. For the week, S&P 500 inched up 0.08 percent, the Dow Jones rose 0.36 percent, while the Nasaq fell 0.33 percent.

2. Hong Kong Equities
Hong Kong stocks posted their worst decline in a month on Friday, erasing much of the week's gains, as investors trimmed positions following S&P's downgrade of China's sovereign credit rating and North Korea's nuclear threats. The U.S. Federal Reserve's plan to shrink its balance sheet and later raise interest rates has also dented sentiment. The Hang Seng index dropped 0.8 percent, to 27,880.53 points, posting its biggest one-day percentage drop since Aug. 18. The Hong Kong China Enterprises Index lost 0.8 percent, to 11,109.00.

3. China Equities
China's stocks fell to an almost one-month low in a choppy trading on Friday, dampened by resource sector. But bank and insurance names helped to pare some losses in the afternoon session. The Shanghai Composite Index settled at 3,352.53, down 5.28 points or 0.16 percent. The benchmark index slipped 0.03 percent this week, not far away from previous lows of 3,331.52 hit on August 25 2017. The trading volume of Shanghai A shares fell to 231.5 billion yuan from 206.3 billion yuan. The CSI300 was flat at 3,837.73.