Markets fall on lower rate-cut expectations, Japan-S Korea dispute

Markets fell on Monday.

The S&P 500 fell 0.7 percent while the STOXX Europe 600 dipped slightly.

Earlier in Asia, though, stocks were sharply lower. The Shanghai Composite plunged 2.6 percent and the KOSPI tumbled 2.2 percent. The Nikkei 225 fell 1.0 percent.

Markets mostly fell on lowered expectations for interest rate cuts but in Asia, a political dispute between Japan and South Korea over wartime labour added to concerns.

Japan imposed restriction on exports to the latter after recent South Korean court rulings awarded damages to Koreans claiming to have been forced to work for Japanese firms during World War II. Koreans are calling for a boycott of Japanese goods in retaliation.

Meanwhile, BlackRock has downgraded its global growth outlook for the second half of the year but still sees a good environment for US stocks.

Jean Boivin, head of the BlackRock Investment Institute, wrote that central banks are creating a “benign environment” and does not see a risk of recession for this year. “Based on that, the next few months do look pretty constructive for markets,” he said.

In contrast, Morgan Stanley has downgraded global equities despite expecting a rate cut because it believes economic weakness matters more for stocks.