[Good Morning Stock Market] Rising Concerns Over US-China Trade War... Domestic Worries About COVID-19 Infection Spread

President Donald Trump of the United States (Photo by AP Yonhap News)

[Asia Economy Reporter Kum Boryeong] U.S. President Donald Trump's attacks on China continue day after day. Not only is he trying to hold China responsible for the novel coronavirus disease (COVID-19), but he is also raising the possibility of imposing tariffs and breaking existing trade agreements, increasing concerns about a U.S.-China trade war. Domestically, with the resurgence of COVID-19 cluster infections, concerns about a second wave of spread cannot be dismissed.

◆ Lee Kyung-min, Researcher at Daishin Securities = Trump's escalation of conflicts with China can be seen as a card to strengthen his political position and rally his support base. Trump's approval rating, which had surpassed 47% and reached its highest point since taking office, recently plummeted to 44%. With various cards for economic stimulus already presented, President Trump is judged to have put the 'China retaliation' card front and center. In fact, Trump's approval rating has stabilized and shown signs of rebound after strengthening his offensive against China, settling around 44%.

On the contrary, a U.S.-China trade agreement seems advantageous for Trump. By maximizing exports to China, reducing the trade deficit, and expanding net exports, an improvement in GDP can be expected. It is highly likely that Trump's recent pressure strategy on China is a strategic move to secure the most favorable position in the second trade agreement process. Of course, U.S.-China conflicts and the hegemonic war will not be ultimately resolved and are expected to escalate in some form over the long term. With re-election approaching, the pressure card against China is effective as a political tool, but the resumption of the U.S.-China trade war is likely to negatively affect Trump's re-election prospects.

Despite the escalation of U.S.-China conflicts triggered by Trump, global financial markets and stock markets are sailing smoothly. The variables that will determine the current trend of global financial markets and stock markets are the COVID-19 issue and the resulting direction and momentum of global fundamentals. In other words, concerns about the U.S.-China trade conflict are variables that may cause short-term volatility and sharp fluctuations, but their influence on the flow and direction of the global economy and the trend of financial markets is judged to be limited.

◆ Kim Ye-eun, Researcher at IBK Investment & Securities = Looking at the stock market environment, it is not favorable. External risks persist, and fundamentals such as the economy and corporate earnings continue to be sluggish. Amid ongoing uncertainty, expectations are positively influencing investor sentiment, leading to index gains.

As the global spread of COVID-19 has somewhat slowed, with growth rates at 1-2%, governments worldwide are gradually starting to normalize their economies. Corporate earnings for the first quarter, which were expected to be weak due to COVID-19, are also relatively good. However, just as it was judged that COVID-19 was entering a containment phase domestically, cluster infections have reoccurred, making it unavoidable to consider a second wave of spread. While the stance of major governments to quickly recover the weakened economy is understandable, it is judged that complacent deregulation could cause greater damage, so vigilance must not be relaxed.

Liquidity from central banks, led by the U.S. Federal Reserve (Fed), is driving index gains, but reliance on liquidity alone cannot continue indefinitely. Considering that President Trump's approval rating is declining, it must be taken into account that any renewed emphasis on conflicts with China could act as a burden on the market at any time.

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