RTTNews - The South Korean stock market on Wednesday wrote a finish to the four-day winning streak in which it had collected nearly 20 points or 1.2 percent en route to its highest closing score in a year. The KOSPI eased back below the 1,570-point plateau, although now investors are predicting a solid rebound at the opening of trade on Thursday.
The global forecast for the Asian markets is firmly positive, thanks largely to encouraging commentary from the U.S. Federal Reserve after it decided to keep interest rates on hold. Housing and airline stocks are primed for a rebound in Thursday's trade, along with steel and telecom shares. The European and U.S. markets all finished with solid gains, and the Asian bourses also are expected to track higher on Thursday.
The KOSPI finished modestly lower on Wednesday, as the financial stocks fell under heavy selling pressure throughout the day. Gains among the technology issues helped to limit the losses.
For the day, the index was down 13.86 points or 0.9 percent to close at 1,565.35 after trading between 1,552.51 and 1,571.74.
Among the decliners, KB Financial Group dropped 3.9 percent, while Hana Financial Holdings lost 4.7 percent, Samsung Electronics fell 1.7 percent, Hyundai Motor lost 1.5 percent and Kia Motors fell 2.4 percent.
Finishing higher, Hynix Semiconductor rose 1.6 percent, LG Electronics gained 3.4 percent and LG Display added 1 percent.
The lead from Wall Street is broadly optimistic as stocks saw a strong outing on Wednesday, with trader expectations largely confirmed by the Federal Reserve. The major averages all closed in positive territory by substantial margins, posting their first positive session of the week after the previous two days were slowed by profit taking.
The Federal Open Market Committee, the policy-making arm of the Federal Reserve, announced Wednesday that it was maintaining the target range for its benchmark federal funds rate at zero to 0.25 percent. The Fed also repeated its belief that low rates will persist for what it calls an extended period. The central bank added that economic activity is leveling out.
The central bank also said it will gradually slow the pace of treasury purchases and expects that the full amount of $300 billion will be purchased by the end of October. Going into the meeting, the Fed was universally expected to leave rates unchanged, but there was some speculation that the central bank could announce the end of its program to buy treasury bonds, a move it had undertaken to further stimulate the economy.
Earlier, traders largely shrugged off a report from the Commerce Department showing that the U.S. trade deficit widened in the month of June compared to the previous month. The deficit for the month still came in narrower than economists had been anticipating. The report revealed that the trade deficit widened to $27.0 billion in June from $26.0 billion in May, with imports increasing at a faster pace than exports. Economists had been expecting a somewhat more significant increase in the size of the deficit to $28.7 billion.
The major averages saw a late session rally stall but still finished with notable gains. The Dow jumped by 120.16 points or 1.3 percent to 9,361.61, the NASDAQ climbed by 28.99 points or 1.5 percent to 1,998.72 and the S&P 500 rose by 11.46 points or 1.2 percent to 1,005.81.
In economic news, South Korea's jobless rate on a seasonally adjusted basis decreased to 3.8 percent in July from 4 percent in the preceding month. The number of unemployed persons fell to 938,000 from 980,000 in June. The number of employed persons declined slightly to 23.54 million in July from 23.58 million in the preceding month. Further, the economically active population decreased to 24.48 million from 24.56 million a month earlier. The participation rate fell to 61 percent from 61.3 percent in June.
Also, the Leading Economic Index for Korea increased in June for the fifth straight month, according to a report Wednesday from the Conference Board. The Leading Index rose 1.5 percent to 105.6.
The board said positive contributions from real exports, the inventories-to-shipments index, machinery orders and credit arrivals offset negative contributions from private construction orders, stock prices and government bond yields. The accompanying Coincident Index, which measures current economic activity, increased 1.3 percent in June to 108.5. Industrial production and overall employment were the major factors.
The Conference Board noted that both indices have risen sharply this year after showing sharp declines in the fourth quarter of 2008. The Board said that taken together, the current behavior of the composite indexes suggests that the improvement in economic activity will likely continue in upcoming months.
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