Overview: The US has ratcheted up pressure on China on several fronts and has sapped risk appetites ahead of the weekend. Equity markets are lower across the world. Even in India, where the central bank unexpectedly cut the repo rate 40 bp, shares fell 0.7%. It was Hong Kong's 5.5% that led the region lower. Europe's Dow Jones Stoxx 600 is off around 1% in late morning turnover to pare this week's gain to about 2.5%. US shares are trading heavily, and the S&P 500 is poised to trim this week's 3% gain coming into today's session. The dollar is bid against nearly all the world's currencies. The yen flat. For the week, though, the dollar is softer against all the majors but the yen and Swiss franc. Among emerging market currencies, the Russian rouble and South African rand are the weakest, losing more than 1% against the US dollar. The JPMorgan Emerging Market Currency Index is snapping a four-day advance with a loss of about 0.4%. Gold slipped to $1717 and rebounded to $1735-1740 today. Oil prices are tumbling, and the July WTI contract is off around 6% to end a six-day advance. If sustained, it would be the biggest loss of the month.
Asia-Pacific
We suspect that many observers are making too big a deal of China dropping its formal 2020 GDP target. There are no policy implications as more stimulus is expected in the coming weeks. More importantly, Premier Li defended the measures to crack down on dissent as allowing Hong Kong and Macau "fulfill their constitutional responsibilities." This comes as the US State Department is to issue a report as early as next week, which if Hong Kong's autonomy is not affirmed, the Special Administrative Region could lose its trade privileges with the US. Hong Kong is not subject to the tariffs applied
