It's time now for an in-depth look at the markets on this Monday.
And for that, I'm joined on the line by Dr. Hwang Seiwoon, Research Fellow at the Korea Capital Market Institute.
Dr. Hwang, thank you for coming on today.
Japanese Prime Minister Shinzo Abe will have been pleased on Sunday to have increased his party's majority in the upper house of the Japanese legislature, but not the super majority he needs to revise the Constitution. What does this mean for the trade restrictions on Korea -- is there any chance they'll be withdrawn? Or, with significant public opposition to the measures, do you think any of that will be reflected in policy?
Abe, who has pledged to take retaliatory measures against South Korea through export restrictions, is expected to maintain his political stance on Korea after the upper house election. After the victory in the national election was confirmed, Abe reiterated his political position over South Korea that it is "not trade retaliation but trade restriction related to the national security issues" in terms of strengthening export regulations.
The reasons for Abe's prolonged export restrictions on Korea are quite clear. Prime Minister Abe appears to have his top political priority on Japan's amendment of the Peace Constitution, and economic disputes with South Korea could give him good reasons for the amendment of the Peace Constitution. Therefore, Abe’s pressure on South Korea will not be weaker after the election, and is likely to have negative impacts on the white-list revision.
We ended last week with stocks on Wall Street down significantly. It seems there's not as much hope for a Fed rate cut bigger than a quarter percent. Korean stocks starting the week off fairly subdued. What's the story today?
In Wall Street stocks ended lower Friday and posted weekly losses as traders assessed a slew of corporate earnings reports and remarks from a top Federal Reserve official. Global equity markets had risen briefly towards the end of last week after dovish comments by New York Fed President John Williams boosted the prospect of the central bank lowering rates by 50 basis points. However, the stock markets gave back those gains, after the New York Fed walked back Williams’ comments by saying his speech was not about potential policy action at the upcoming Fed meeting.
Asian stocks eased on Monday as investors reduced expectations of an aggressive interest rate cut by the Federal Reserve. Expectations for a 50 bp cut were scaled back further after the Wall Street Journal reported the Fed was likely to cut rates by 25 bps. South Korea's KOSPI shed 0.13%, while Japan's Nikkei fell 0.28%.
The Bank of Korea will be releasing the growth figures for the second quarter this week. Also, Korea will be bringing the issue of Japan's trade curbs to the WTO. What should we be watching this week?
The Bank of Korea will release economic growth rate for Q2 2019 on Thursday. The BOK has lowered its forecast for growth rate this year from 2.5 percent to 2.2 percent in last week. The growth rate in the second quarter will not be as high as expected. The market consensus for the second quarter growth rate is about 1.0%.
Many of KOSPI companies will release their earning report of Q2 2019 this week. Companies releasing earnings report include Hyundai Motor Company, Woori Financial Group, Cheil Worldwide, POSCO, Kia Motors, Samsung Bio Logics, LG Display, LG Chemical, Hyundai Mobis, SK Hynix, and NAVER.
ECB monetary policy meeting will be held on this coming Thursday. Investors are watching if ECB will take another favorable monetary policy measure for the market in line with the global monetary policy easing. In the meantime, the ECB has talked about additional stimulus measures several times.
Alright, Dr. Hwang. We'll have to leave it there today.
Thanks so much for coming on.