From Marc to Market:
Overview: The new equities high in the US failed to carry into today's activity. Asia Pacific markets were mostly lower, led by Hong Kong and the mainland to snap a three-day advance. Europe's Dow Jones Stoxx 600 is off nearly 0.5% through the European morning. US futures are soft. The bond market sell-off continues, with the US 10-year pushing above 1.35%, a 10 bp increase on the week. European benchmark yields are 1-2 bp higher on the day and 7-12 bp higher on the week. The dollar is firm, with the Swiss franc and Australian and New Zealand dollars leading with a 0.20%-0.25% loss. The euro and Norwegian krone are fractionally higher. Emerging market currencies are also mostly lower, with the Turkish lira and South African rand posting modest gains. Gold appears to be rejecting the $1800 area and is pinned near yesterday's lows below $1785. Oil is paring its three-day rally, and the October WTI contract is around $1, lower than yesterday's $68.55 high. China's iron ore contract rose for a fourth session, during which time it has gained nearly 8.5%. On the other hand, copper is giving back yesterday's gains to end a four-day bounce that followed a four-day slide, leaving it off around 5.2% for the month.
Asia Pacific
South Korea became the first large Asian country to raise rates. It was a close call, and we had thought the spike in the virus would encourage the central bank to wait until next month. The seven-day repo rate was raised 25 bp to 0.75%. Headline inflation was at 2.6% in July, and the core rate was at 1.7%. The central bank left its growth forecast unchanged at 4%, signaling it does not expect the pathogen to have much lasting impact. It lifted its inflation forecast to 2.1%, above target, which signals another hike is coming, even if not at the October meeting. There was one dissent. The won softened for the second consecutive session after rising more than one percent in the first two sessions of the week, leaving it about 0.80% higher on the week.
Japan extended the formal emergency to more prefectures and now covers the area where 70% of the population lives. The formal emergency is not legally binding or enforceable, which may help explain many cases. Still, the vaccination efforts have improved, and an estimated 43% of the population has been fully vaccinated compared with 52% in the US and 66% in Canada. Prime Minister Suga, who received the endorsement today of an LDP faction that supported him early in the last leadership contest, has set the goal of fully inoculating 60% of the population by the end of next month. It could surpass the US....
....MUCH MORE
