From Marc Chandler at Bannockburn Global Forex:
Overview: Friday the 13th is supposed to be ominous, but the global capital markets are mostly subdued. China's port shutdown and anxiety since South Korea reported a decline in memory chip exports weighed on Asia Pacific equities, with the Kospi and Taiex falling more than 3% this week and sending the South Korean won to its lowest level of the year. The Baltic Dry Index rose 2.75% yesterday to put this week's increase near 4% coming into today. This week will be the ninth weekly advance in the last 10 weeks, and it is up nearly 44% over this span. European stocks continue to edge higher, and the Dow Jones Stoxx 600 is posting gains for the 10th consecutive session. US futures are firmer after the S&P 500 and Dow Industrials set new records yesterday. The US 10-year yield is slightly softer, near 1.34%, representing a five basis point increase on the week. European bonds are narrowly mixed, though Greece's benchmark yields set a new record low near 51 bp today. The greenback has a softer bias through the European morning. Most major currencies are 0.1%-0.2% firmer today. Among emerging market currencies, Asia Pacific currencies have weakened the most, while the Mexican peso, which initially weakened following yesterday's rate hike, has come back slightly better bid to lead EM. The JP Morgan Emerging Market Currency Index is slightly higher on the day and up about 0.15% for the week before Latam local currencies begin trading. Gold has continued to recover from the flash crash at the start of the week. Monday's high was $1765, and the yellow metal poked briefly through $1760 today. Oil has slipped lower and is off a little more than 1% since the middle of the week. Around $69.00, September crude is up about 1% this week after dropping nearly 7.7% last week. China's efforts to curb its steel output have seen iron ore prices tumble. Today's 2% loss brings the weekly drop to 6.8% and the four-week plunge to 26%. Copper prices are steady and are holding on to about a 0.5% gain this week after falling 3% last week.
Asia Pacific
News yesterday that South Korea's memory chip exports fell last month for the first time since last April spurred a dramatic market reaction. Flash memory chips were the culprit, with shipments off 20%, according to the trade ministry. However, the export of RAM chips rose slightly. This was the main weight on South Korean and Taiwanese equities and a drag on the respective currencies.
The dissolution of Hong Kong's Professional Teachers Union, with 95k members, following a report in the Chinese state media that called it a "malignant tumor," illustrates the kind of informal pressure Beijing is bringing to bear on the Special Administrative Region. The formal power is expected to be expressed soon, perhaps as early as next week, when Beijing will impose or get Hong Kong authorities to adopt the anti-sanctions law that makes it illegal to comply with foreign sanctions. Foreign banks in Hong Kong are seen to be particularly vulnerable, though, as usual, how the laws are enforced will be key. Yet the dilemma is clear, both Washington and Beijing cannot be satisfied simultaneously.
Japan reports Q2 GDP first thing Monday in Tokyo. It may have eked out the slightest of growth with the help of business spending. However, private consumption looks flat, and net exports appear to have shaved growth by 0.2%, the same as in Q1. The GDP deflator is expected to have fallen from -0.1% in Q1 to -0.9% in Q2 (year-over-year), the most deflation since the first half of 2012. Note that the deflation is despite the large deficits and debt Japan has taken on, and the BOJ's balance sheet is well over 100% of GDP....
....MUCH MORE
