It's time for for an in-depth look at the market action on this Wednesday.
And for that, I'm joined on the line by Dr. Hwang Sei-woon, Research Fellow at the Korea Capital Market Institute.
Dr. Hwang, thank you for coming on today.
Wall Street closed higher overnight, apparently on anticipation for the U.S.-China trade talks resuming next week. The Dow up about two thirds of a percent and the Nasdaq not far behind. What's happening there and in the Korean markets?
In Wall Street, stocks ended higher Tuesday on news that face-to-face talks between U.S. and Chinese trade negotiators will begin next week. A batch of stronger-than-expected earnings also lifted the market sentiment.
Stocks extended gains late in the session after the press reported that U.S. Trade Representative Robert Lighthizer would travel to Shanghai next week for face-to-face trade meetings with Chinese officials. In addition to this, the U.S. corporate earnings season is off to a strong start, with nearly 80% of 104 S&P 500 companies topping earnings expectations so far in the second quarter.
Asian shares nudged higher on Wednesday amid hints of progress in the Sino-U.S. trade talks. Not so welcome was news the U.S. Justice Department was opening an antitrust investigation of major digital tech firms and possible anticompetitive practices. Japan’s Nikkei added 0.35%, while South Korea’s KOSPI gained 0.21% as of close.
At the WTO's general meeting, they're discussing Japan's trade curbs on Korea. Japan, of course, arguing that it's not imposing new restrictions but merely going back to business as usual. What do you see coming out of this meeting?
The highest decision-making body of the WTO will be reviewing Japan's trade restrictions following a formal complaint from Seoul, which earlier sought a similar move by the WTO Council for Trade in Goods. Japan's export restrictions on the three industrial materials appear to violate the rules of the WTO, and the move is a politically motivated retaliation for South Korean court rulings on wartime forced labor.
South Korea is appealing that it would be an unjust and groundless measure to have Korea removed from Japan's list of preferential trade partners without providing any concrete example of a case where such controls were inadequate. South Korea’s appeal is likely to be supported by WTO because Japan's export restrictions are apparently political retaliation. However, Korean companies could suffer from sizable damages for a long time until the final decision is made.
The IMF has lowered its growth forecast for the global economy this year from 3.3 percent to 3.2 percent. This is partly because of the U.S.-China trade war, but why the downgrade?
The International Monetary Fund further reduced its global growth outlook, already the lowest since the global financial crisis in 2008, and suggested that policy missteps on trade could derail a projected rebound.
The world economy will expand 3.2% this year and 3.5% next year, both down 0.1 percentage point from April projections. A rate of 3.3% or lower would be the weakest since 2009.
The slowdown in growth and downgrade in the forecast reflect the ongoing fallout from trade tensions. Since the IMF’s last round of forecasts in April, three more months of data have confirmed weaker growth in much of the world, while tariffs escalated between the U.S. and China during a two-month breakdown in negotiations. Global trade has decelerated rapidly during the ongoing trade tensions. Dynamism in the global economy is being weighed down by prolonged policy uncertainty as trade tensions remain heightened despite the recent U.S.-China trade truce.
Alright, Dr. Hwang. Lots to watch right now. Thanks for an interesting discussion.