[Good Morning Stock Market] Concerns Grow Over Resumption of US-China Trade War Amid COVID-19 Accountability Debate

Global Stock Markets Maintain Uptrend as US and Others Ease Lockdown Measures
Hantoo Securities "If Trade War Escalates, Retaliatory Measures Other Than Tariffs Will Be Considered"

[Asia Economy Reporter Minji Lee] On the 6th (local time), the U.S. stock market showed mixed trends as economic activity indicators weakened due to the shock of the novel coronavirus infection (COVID-19). Furthermore, the market shrank again amid forecasts that the U.S.-China trade war could reignite due to disputes over responsibility for the COVID-19 crisis.

[Image source=Yonhap News]

◆ Sungkeun Kim, Researcher at Korea Investment & Securities=Recently, relations between the U.S. and China have deteriorated again. After the U.S.-China Phase One agreement at the beginning of the year, the relationship had been quiet but rapidly cooled as COVID-19 spread quickly in the U.S.

The market is concerned about actual retaliation against China. Last week, when President Trump stated that tariffs could be imposed and warned that if China does not purchase U.S. products as promised, the Phase One agreement could be broken, the S&P 500 index fell about 4% over two days.

The background for President Trump’s renewed attacks on China is the November presidential election. Due to the spread of COVID-19 in the U.S., a new election strategy is needed. Trump will likely strongly attack China to escape negative public opinion caused by COVID-19 while trying to bring about economic recovery as quickly as possible.

Therefore, it is judged that the possibility of actually imposing tariffs is low. Imposing tariffs would inevitably hinder rapid economic recovery. The current situation, where most medicines and medical equipment must be imported from China to overcome COVID-19, is also a burden factor.

However, there is sufficient possibility of realizing retaliatory measures other than tariffs. Retaliation forms such as sanctions on Chinese companies including Huawei and revocation of China’s sovereign immunity are expected to act as burdens on the market.

◆ Byungkyu Min, Researcher at Yuanta Securities=In April, the global stock market rose about 10.6% based on the Morgan Stanley Capital International All Country World Index (MSCI ACWI). All 49 countries composing the index posted positive returns, and all 11 sectors continued their strong performance compared to the previous month. When divided into developed and emerging countries, developed countries had higher returns, but individually, India (14%), Taiwan (13%), and Korea (11%) stood out.

The global stock market is expected to continue its rebound as major developed countries, including the U.S., begin phased lifting of lockdowns. Italy, one of the countries most severely affected by COVID-19 in Europe, normalized factory operations from the 4th, and Germany and Spain have announced plans to ease lockdown measures starting early May.

In Europe, the strong rebound in automobile companies’ stock prices led to high returns in Germany. Last month, Germany rose 9.3%, significantly outperforming the MSCI Europe (5.5%). By company, Volkswagen’s stock return was 20%, BMW and Daimler both rose 14%.

China, where COVID-19 first spread, showed signs of recovery from February’s slump. Although global manufacturers’ manufacturing PMI fell from 47.3 points in the previous month to 39.9 points in April, China only dropped 0.7 points from the previous month to record 49.4 points. Considering that China experienced leading downturn and recovery due to COVID-19, this April shock is expected to serve as a reference milestone for countries other than China where the impact was confirmed.

This content was produced with the assistance of AI translation services.