The Asian stocks flourished on Monday due to the good statistics on economic development in the countries of the region which gave positive dynamics to the stock market indicators. However, the recently paused tensions between the US and China began to manifest again, which may hint that a new wave of conflict is not far off.
US President Donal Trump made a rather ambiguous and frightening statement for investors that in the event of his re-election as president of the United States, he intends to stop all contacts with China, including ending the dependence of the American economy on the Chinese economy, which indicates a complete breakdown of all trade relations.
Trump's plans look truly grandiose and ambitious. He assures that the US simply needs to end its dependence on China since this is the only thing that stands in the way of making the US a manufacturing superpower. Trump no longer intends to rely on China, because he considers it an extremely unreliable partner. There are only two ways left: either to completely divide the economy or to introduce incredibly high tariffs, which will naturally force China to withdraw from cooperation with the US. The latter has already been done. Trump openly declares that the state will continue to lose billions of dollars until it ends economic cooperation with China. If the president's deeds do not disagree with words, then a new, and deeper conflict between Washington and Beijing cannot be avoided, which is very much feared by market participants on both sides.
Aside from the US-China dispute, investors are also watching the situation around the UK's exit from the EU with trepidation. The continuation of the negotiations on the trade agreement is scheduled on Tuesday. Note that it was temporarily suspended due to deep differences between the parties. The EU authorities assure that they are ready to take any steps, just to come to an agreement as soon as possible, but more and more often hints appear in the press that the trade agreement may simply not take place. Nevertheless, the European Union is ready for this turn of events, however, they express great hope that the UK will still fulfill its obligations under the withdrawal agreement.
Japan's GDP statistics for the second quarter of this year turned out to be slightly worse than preliminary forecasts. It was assumed that there will be another reduction of about 7.8%, but the actual decline was about 7.9% compared to the previous quarter. The reason for the negative is still the same - the coronavirus pandemic. Thus, Japan's GDP has been contracting for the third time in a row. Moreover, such rates of decline have become record-breaking.
Another important reason for the decline in Japan's GDP was the slowdown in business investment in the country. The indicator dropped 4.7%, while it was previously stated that it would not be lower than 1.5%. On an annualized basis, Japan's GDP for the second quarter plummeted 28.1%. This turned out to be slightly better than the estimated 28.6% in the forecasts.
Japanese consumer spending fell 6.5% in the second month of the summer. At the same time, there was an increase in bank lending in the country by 6.7% on an annualized basis. This increase was a record and was provided by the fact that companies affected by the COVID-19 pandemic rushed to turn to banks for financial support.
Japan's Nikkei 225 Index rose 0.6%.
China's Shanghai Composite Index went up 0.3%. The Hong Kong Hang Seng Index rose slightly by 0.1%.
South Korea's Kospi index climbed 0.7%.
The Australian S & P / ASX 200 index rose 0.8%.
European stock exchanges, on the other hand, slightly moved to necessary correction on Tuesday, after the Stoxx Europe 600 index reached its highest level in the last month.
In addition, the pressure continues also from the uncertainty of the US market, which did not traded yesterday due to the holidays.
The main event of the week for market participants is the next meeting of the main European regulator - the ECB, which is scheduled this Thursday.
Investors are also not letting go of the situation with the negotiations on a trade agreement between the UK and the EU, which is expected for resumption in any day. The European Union authorities have initially stressed that they are doing everything in their power to reach a consensus on all issues in the near future.
The statistics presented today showed that the economy in the nineteen EU countries contracted by 11.8%, which turned out to be slightly better than the preliminary forecasts. Experts had expected a drop in GDP within 12.1%. However, the real decline was enough for the region to enter a recession.
The general index of large enterprises in the European region Stoxx Europe 600 dipped 0.96% Thursday morning, which forced it to move to the level of 364.42 points.
The UK FTSE 100 Index dropped 0.38%. The German DAX Index dropped 0.8%. France's CAC 40 index was down 1.14%. Italy's FTSE MIB Index parted 1.61% to become the leader in the said decline Spain's IBEX 35 Index fell 1.19%.