Asia markets fall as Japan economy grows slower than expected; Hong Kong cancels Friday trading

UBS says that European small and mid-cap stocks are making a comeback, having outperformed large-cap companies this summer.

UBS’ analysts explain why, and name their top stocks for the rest of the year.

CNBC Pro subscribers can read more here.

— Amala Balakrishner

The Philippine trade deficit increased to $4.2 billion in July, a climb compared to the $3.9 billion deficit seen in June.

Exports in July fell 1.2% year-on-year, a reversal from the 0.9% growth in June. Imports to the country however, plunged 15.3% year-on-year in July, a steeper fall from the 15.0% contraction the previous month.

In July, the Philippines’ total external trade in goods amounted to $16.49 billion, which is 10.5% lower year-on-year.

— Lim Hui Jie

Analysts at Barclays have identified electrification as a “mega theme” and have named several stocks set to benefit.

“The electric grid plays a key electrification and energy transition role,” the analysts wrote in a research note dated Aug. 16.

“At the center of the electrification mega theme, which encompasses EVs, renewables, energy storage, smart buildings, heat pumps, and more, is an aging electric grid that is key to ensuring a clean, reliable, affordable, and equitable energy transition.”

The bank named a number of companies it said were “tied to changing grid trends and provide their end-market exposure.”

CNBC Pro subscribers can read more here.

— Amala Balakrishner

Japan’s second quarter gross domestic product expanded less then expected, with the economy growing 4.8% on a quarter-on-quarter annualized basis.

This was lower than the 6% announced in the preliminary release in August, and below the 5.5% growth expected by economists polled by Reuters.

On a quarter-on-quarter basis, second quarter GDP climbed by 1.2%, compared to the 1.5% rise seen in the preliminary basis and slightly lower than the 1.3% expected by the Reuters poll.

— Lim Hui Jie

The likelihood that inflation numbers are going to remain stubbornly high for a while could mean more interest rate increases, former St. Louis Federal Reserve President James Bullard said Thursday.

In a CNBC interview, the the current dean of the Mitchell E. Daniels Jr. School of Business at Purdue University raised the prospect of more policy tightening as core inflation is stuck around 4%.

“That’s raising the risk that the Fed will have to follow through on its promise rate increase sometime in the next couple of meetings, and there’s some risk that they’d have to go a little bit higher even from there,” Bullard told CNBC’s Steve Liesman.

Inflation numbers “have got to come down into the 3% range, and eventually the 2% range, and if that is not happening and they hang up too high, the Fed may have to do more,” he said.

—Jeff Cox

Maybe the strong dollar is another September headwind for the stock market.

The dollar index Thursday is on pace for its fifth straight daily advance, near a six-month high, and headed for an eighth straight weekly gain — the latter for the first time since February 2015. The index measures the dollar against six leading currencies, but mostly the euro and the Japanese yen.

The onshore Chinese yuan (which isn’t in the index) is at its weakest since Dec. 2007, while the euro and the British pound (in the index) are at three-month lows.

While the strong dollar helps American tourists in Paris, the problem for stocks is that it raises the cost of U.S. exports, damaging U.S. competiveness, and diminishes the value of profits earned outside the U.S. when translated back into greenbacks.

— Scott Schnipper, Gina Francolla

Apple shares fell more than 2% after Bloomberg News reported China is planning to extend a ban on iPhone use to state-owned corporations. A day earlier, The Wall Street Journal reported the China was moving to prohibit iPhone usage in government agencies.

— Fred Imbert