Asia Pacific Shares Underpinned Ahead of Powell Speech; Japan-South Korea Trade Dispute Escalates

Powell is likely to set the tone in the global stock markets for several weeks when he delivers his speech at the Jackson Hole, Wyoming central bankers’ symposium. Investors are hoping Powell presents a dovish front by signaling a series of rate cuts over the next 12 months.
James Hyerczyk
Asian Shares

The major Asia Pacific stock indexes traded mostly higher on Friday with South Korea the lone loser. The trade was choppy early in the session as investors positioned themselves ahead of a key speech by Federal Reserve Chairman Jerome Powell at 14:00 GMT.

Powell is likely to set the tone in the global stock markets for several weeks when he delivers his speech at the Jackson Hole, Wyoming central bankers’ symposium. Investors are hoping Powell presents a dovish front by signaling a series of rate cuts over the next 12 months that will show the world with clarity and conviction that Fed policymakers will do whatever it takes to stabilize the U.S. economy and prevent a global recession. Stocks could rally on this news.

If Powell continues to reiterate his “mid-term cycle” narrative then stocks could plunge.

At 07:22 GMT, Japan’s Nikkei 225 Index is trading 20710.91, up 82.90 or +0.40%. South Korea’s KOSPI is at 1948.30, down 2.71 or -0.14% and Hong Kong’s Hang Seng Index is trading 26201.06, up 152.34 or +0.58%.

In China, the Shanghai Index is at 2897.43, up 13.99 or +0.49% and in Australia, the S&P/ASX 200 Index is trading 6523.10, up 21.30 or +0.33%.

Japan-South Korea Conflict

The conflict between Japan and South Korea raised its ugly head on Friday with tensions between the two technology powerhouses escalating on Thursday after Seoul said it was cancelling an intelligence-sharing pact with Tokyo amid a bitter trade dispute.

The arrangement was designed to share information on the threat posed by North Korea and its missile and nuclear activities.

According to CNBC, “Japan’s Defense Minister Takeshi Iwaya said Friday South Korea’s decision showed it failed to appreciate the growing security threat posed by Pyongyang’s missile activities.”

The news helped drive up defense stocks in Japan and South Korea.

Trade War Chatter

On Thursday, China threatened ‘countermeasures’ against new U.S. tariffs on Chinese goods, but did not provide details on how it will respond.

“If the U.S. obstinately clings to its own way, China has no choice but to take corresponding countermeasures,” Ministry of Commerce Spokesman Gao Feng said Thursday in Mandarin, according to a CNBC translation. “The U.S. should change its wrong actions.”

He did not elaborate on what those measures might entail, but emphasized the need for fairness in trade negotiations.

RBNZ Chief Comments Boost New Zealand Dollar

The New Zealand Dollar rebounded from a three-and-a-half year low on Friday after the head of the country’s central bank said he was “pleased” with the current level of interest rates following a surprise half-point cut early this month. Investors interpreted the comment to mean the RBNZ may pass on another rate cut in September.

Reserve Bank of New Zealand Governor Adrian Orr told Bloomberg TV in Wyoming that the RBNZ’s cut to 1 percent on August 7 allowed the bank to get ahead of any economic slowdown and reduced the probability of having to do a lot more later.

“So we’re pleased with where we are,” Mr. Orr said.

Muted response to NZ Retail Sales Report

Retail sales growth stalled in the June quarter, although rising prices helped the value of sales catch up from a lull earlier in the year. Retail sales volumes rose a seasonally adjusted 0.2 percent in the June quarter from 0.7 percent in the March quarter, Stats NZ said. Economists were looking for a 0.2 percent increase.

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