RTTNews - The winning streak has reached four sessions for the South Korean stock market, which has gathered nearly 20 points or 1.2 percent en route to its highest closing score in a year. The KOSPI closed just shy of the 1,580-point plateau, although now analysts are expecting the market to consolidate when it kicks off trade on Wednesday.
The global forecast for the Asian markets is fairly pessimistic as investors are likely to be cautious ahead of the Federal Open Market Committee's comments on Wednesday about the state of the U.S. economy. Financials and properties are likely to be under pressure, along with some of the resource stocks. The European and U.S. markets finished sharply lower, and the Asian bourses are also expected to trade to the downside.
The KOSPI finished barely higher on Tuesday, as gains among the automobile producers were offset by weakness among the financial stocks and airlines.
For the day, the index was up 3.10 points or 0.2 percent to close at 1,579.21 after trading between 1,570.51 and 1,580.44.
Among the gainers, Ssangyong Motor surged by the daily limit of 15 percent, while Industrial Bank of Korea added 2.4 percent, LG Electronics rose 3.5 percent and Hyundai Motor added 0.9 percent.
Finishing lower, Korean Air fell 3.6 percent, while Shinhan Financial Group fell 3 percent, KB Financial Group dropped 0.7 percent and SK Energy fell 2.4 percent.
Wall Street offers a negative lead as stocks posted notable losses on Tuesday, with traders doing some additional profit taking ahead of key economic data due out in the second half of the week. The major averages all ended the day firmly in negative territory, adding to the moderate losses posted in the previous session.
On the economic front, traders largely shrugged off the Labor Department's report showing a much bigger than expected increase in productivity in the second quarter. The growth came as hours worked fell at a faster pace than output. At the same time, the report also showed a steep drop in unit labor costs. The report said that productivity increased by 6.4 percent in the second quarter compared to a downwardly revised 0.3 percent increase in the first quarter. Economists had expected productivity to increase by 5.5 percent.
Meanwhile, the Labor Department also said that unit labor costs fell by 5.8 percent in the second quarter following a revised 2.7 percent decrease in the first quarter. The steep drop in costs exceeded the expectations of economists, who had expected a 2.5 percent drop.
Separately, the Commerce Department released a report showing that wholesale inventories fell by much more than expected in the month of June, although the report also showed a modest increase in wholesale sales. The report showed that wholesale inventories fell 1.7 percent in June following a revised 1.2 percent decrease in May. Economists had expected inventories to fall 0.9 percent compared to the 0.8 percent drop originally reported for the previous month.
Traders are also looking to the two-day Federal Open Market Committee meeting that began today, although the Fed's rate decision is not expected to be revealed until tomorrow afternoon. The central bank is widely expected to keep the fed funds futures rate unchanged. However, the Fed's commentary on growth and inflation and any additional information on quantitative easing measures have the potential to move the markets.
The major averages all ended the day notably lower, although they were well off their worst levels of the day. The Dow closed down by 96.50 points or 1 percent at 9,241.45, the NASDAQ slipped by 22.51 points or 1.1 percent to 1,969.73 and the S&P 500 fell by 12.75 points or 1.3 percent to 994.35.
In economic news, the Bank of Korea on Tuesday voted to keep interest rates on hold, maintaining the record low of 2.00 percent - in line with expectations. The bank had trimmed rates by 50 basis points to 2 percent on February 12, marking the sixth rate cut in the previous four months - but has held steady ever since.
The BoK had pared rates by 25 basis points on October 9 and then slashed them again by 75 basis points in an emergency meeting on October 27. Then on December 11, the bank slashed rates by another 100 basis points in the largest rate cut in the bank's history - since it started adopting a benchmark interest rate in 1999. On January 9, the bank trimmed rates by 50 basis points to 2.50 percent.
Before raising rates in August to combat inflation, the board had left interest rates at 5.00 percent for 11 straight meetings.
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