By Joyce Yu
Philadelphia, PA–Global stocks bounced back as North Korea tensions subside. U.S. stocks opened higher Wednesday.
The Dow Jones industrial average gained 0.3% on Tuesday, while the S&P 500 and Nasdaq closed 0.1% higher.
Following North Korea missile launch early Tuesday, US President Donald Trump said “all options are on the table” while North Korean leader Kim Jong Un commented the missile was fired in protest at annual military exercises between the U.S. and South Korea.
Comments from Kim Jong Un suggested the situation won’t escalate. Coupled with Trump’s tempered remarks, this suggests tensions are unlikely to intensify, fueling equity markets to rebound, according to a Bloomberg report.
In a Bloomberg Television interview, Khoon Goh, Australia & New Zealand Banking Group Ltd.’s head of Asia research, said “We’ve seen the typical reaction that you would expect yesterday, with the safe-haven assets like the yen gaining and the Korean won obviously weakening and equity markets in this region selling off,”
“What’s interesting is that the reaction has been fairly muted and a lot of the moves have largely reversed and I think it’s a case now where what’s happening with North Korea is not necessarily new.”
Separately, US economy grew 3.0 % in second quarter, the Commerce Department said in its second estimate on Wednesday, reinforcing the country’s robust consumer spending and strong business investment.
This means the economy grew 2.1 percent in the first half of 2017, up from the 1.9 percent reported last month.
Growth in the first quarter was 1.2%. Economists polled by Reuters had expected that second-quarter GDP to grow a 2.7%.
Q2 growth was the strongest in more than two years, and retail sales and business spending figures so far indicate the economy is able to maintain its momentum in the third quarter.
Predicting US GDP to grow close to 3% in Q3, Paul Ashworth, chief U.S. economist at Capital Economics, shared that he believed that the strength in consumer spending should result in an “even stronger hand-off” for growth going into the current quarter.
Strong growth and a tight labor market support views the Federal Reserve will start to cut stimulus package and increase interest rates in December.
“A series of strong economic data reminded traders and investors that the (Federal Reserve) is on course to shrink its balance sheet and lift rates again,” said Markus Allenspach, an analyst at Julius Baer.
President Donald Trump aims to achieve a 3.0% growth for 2017 through a mix of tax cuts, deregulation and infrastructure spending.
On the other hand, savings and wage gains continue to be sluggish. In the second quarter, the saving rate slipped to 3.7 percent from 3.9 percent in the first quarter. Inflation remained benign.
