How Will Trump-Kim Talks Impact Stocks Market
Early March, President Trump surprised the global word when he agreed to meet North Korean president Kim Jong Un in a summit. The meeting would be historical since it marked the first time a sitting American president and a North Korean leader would meet.
Of course, all rational citizens welcome such a move because the two leaders have been threatening each other with war and nuclear weapons. Now, experts speculate that the meeting could reduce the likeliness of war and in return have a significant economic effect; more especially on the stock market.
Kim himself is still interested in “complete denuclearization” of the Korean Peninsula. With that, North Korea would get into an agreement to surrender its nuclear program under the watch of an international community; in this case, the US.
How the North Korea Nuclear Weapon Has Threatened Stocks Market
In the last couple of years, North Korea has referred to its nuclear weapons as ‘treasured sword.’ But the sword has threatened the financial markets more especially on socio-political instability aspect. Apparently, that has snatched away the confidence of investors hence directly impacting the stock market.
Furthermore, the North Korea nuclear weapon has led to increased tensions and escalating crisis. That has made the country face harsh international sanctions leading to deteriorating economic system, scaring away stockbrokers.
Moreover, the constant taunts between the two leaders have resulted in a lot of market uncertainties. They have made investors unwilling to invest in the stock market because of the fear of deteriorating profit on the delicate venture.
Why Does The Talk Matter So much?
The feud between North Korea and America has existed for decades. The past four US presidents have been involved in this critical matter, but reaching an agreement has failed. In the last couple of years, North Korea cited the US policies as being hostile; being the primary reason why North Korea has resisted diplomatic solution.
How Trump-Kim Talk Will Impact Stocks Market
The talk would be historical given that no sitting US president has met with a North Korean leader. Just the other day, North Korea threatened it had developed long-distance missiles which would penetrate into the US mainland.
As a result, there was a global concern from the international community that the hostilities between the two countries would escalate into something big; and in turn, destroy both social and economic spheres.
Due to such threat, there were huge recessions in the stock market. Investors feared to pump their financial assets in the stock market; fearing that the ongoing political stability would threaten their existence.
And following the cancellation of the much-anticipated summit last Thursday, Stocks plummeted. The meeting was scheduled for June 12, and the cancelation only further led to increased hostility between the two great leaders each with one of the most advanced military control.
Over the weekend, North Korea economy experienced a slide in oil prices. Also, there was a high uncertainty on new tariffs. Big companies felt the impact of the canceled summit among them the oil companies. Such potential doubts scare away investors from engaging in any impacting stock market activity.
Another significantly affected sector following the cancelation of the summit was the automotive industry. Asia alone exported one-third of vehicles used in the US in the last financial year. And following the cancelation, there was a significant decline in the volume of automotive exports from Asia to the US. It is this geopolitics that has now made growing stocks face risks from within and beyond the borders of these two nations.
And funny enough, early in April, President Trump said he would impose tariffs to make the market move to 60 percent. Such a comment made experts speculate that the president was willing to use specific harsh policies to achieve significant outcomes. At one point, Trump added that he was imposing the tariffs since “he couldn’t let other countries take advantage of the United States.”
What Are The Likely Scenario Should The Potential Meeting Occur?
The meeting between the U.S. and North Korean leaders would in no doubts reduce the geopolitical tensions given that talks on the denuclearization of the region have failed for decades.
But Kim himself has reaffirmed his stand on this critical matter. In multiple occasions, he has maintained his position of suspending nuclear tests in North Korea and eliminate the fears existing in the stock market.
Even though there are some high uncertainties about the possibility of holding the meeting, it will reduce geopolitical fears without any doubts. And should this be the case, then the talks will help in the economic performance of both Asian and the US markets.
For one thing, the ongoing tussle between these two heavily militarized nations more especially about the impending war could harm the economic activity; leading to financial crisis.
Should the two leaders meet, then the two nations would lift sanctions against each other on trade, finance, and energy. Once the sanctions are lifted, investors will be more willing to participate in the stock market.
And given the strategic location of North Korea, market economies of China, Japan, and South Korea would be the greatest beneficiaries of rare earth minerals found in North Korea. The country would also attract Foreign Direct Investment given its reserves of gold, copper, zinc and other precious metals.
Even though North Korea, under the rule of Kim Jong Un, has invested its limited resources in nuclear weapons, the country still depends on China for food and fuel. And once Kim holds talk with Trump, he can boost his nation’s economy by creating a desirable friendly environment for the stock market trade.
The stand-off between the US and North Korea is likely to stop should the two leaders hold talks. The talks will be likely to improve the strain relations between other directly affected players (South Korea, China, and Japan). And once the heightened tensions dissolve, the stock market which plays a crucial role in the growth of an economy will improve significantly due to an increase in financial inflows. What is needed is just the implementation of reforms in the scheduled talk to enhance the overall business environment and the stock market in general.
News announcements are always followed by movements in the financial market. It is important to know how to read the economic calendar to access and evaluate the impact announcements may have on an individual sector of the market.