After US President Trump’s  threat of a "total destruction", North Korea responded with reports about possible new hydrogen bomb test in the Pacific Ocean, resulting in falling Asian stocks, while the Japanese yen, Swiss franc and safe-haven gold have gained. Trump can show a first success in the fight against the regime in North Korea, as yesterday the Chinese state bank instructed all the country's commercial banks to cut trade relations with North Korea, posing a serious disruption potential to its nuclear weapons project. S&P Global Ratings downgraded China’s long-term sovereign credit rating, reflecting the decreasing international confidence in China's ability to move away from a credit-driven growth strategy.

The US central bank confirmed on Wednesday that it will start shrinking its USD 4.5trn balance sheet in October. The reduction will be implemented gradually and in small steps of USD 10bn per month. The Fed's interest rate policy, which is more decisive for the markets, remains – as expected – currently unchanged. US central bankers, however, signaled a rate hike in December and three more to follow in 2018.

Today the attention of the financial markets will be on the US Federal Re-serve's decision about plans to unwind parts of its USD 4.5trn balance sheet. This will be the first major reversal of global quantitative easing since the financial crisis a decade ago. Germany is issuing a new bond of EUR 2bn today, making history in the German bond market with a 1.25% interest coupon rate – a new European record low.

In his first speech at the UN yesterday, US President Donald Trump pleaded for billions of savings in the world organization, which he had already described as an "underperformer" during his election campaign. Meanwhile US Secretary of State Rex Tillerson said that the USA could re-engage in the Paris climate deal after the initial refusal to participate. China and the EU are going ahead in the battle against global warming and are increasing their efforts for a coordinated mutual approach.

Asian shares reached decade highs on Monday following a record-breaking Wall Street session, while the yen declined. MSCI’s broadest index of Asia-Pacific shares outside Japan rose +0.9% to reach the highest level since 2007. This week US Federal Reserve chair Janet Yellen is expected to announce the start of the US central bank's effort to winnow its USD 4.5trn portfolio while leaving rates unchanged.