US Stock Market Plummets... Corona Recession Hits Global Markets

US Stocks Fall 4%, Korean and Japanese Markets Drop Together
Concerns Over KOSPI Breaking 2200 Level

As concerns over the global spread of the novel coronavirus infection (COVID-19) intensified, the KOSPI started sharply lower again on the morning of the 28th. A dealer is working in the Hana Bank dealing room in Jung-gu, Seoul. [Image source=Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The U.S. New York stock market collapsed helplessly amid fears of the novel coronavirus infection (COVID-19). Concerns are spreading that the U.S. is no exception to the economic downturn caused by COVID-19, increasing global worries about a 'coronavirus-induced recession.'

On the 27th (local time), the Dow Jones Industrial Average fell 1,190.95 points (4.42%) to close at 25,766.64, the S&P 500 index dropped 137.63 points (4.42%) to 2,978.76, and the Nasdaq index declined 414.29 points (4.61%) to 8,566.48. It is also being evaluated that the market has officially entered a correction phase after falling 10% from last week's peak.

The Dow's decline on this day is the largest in points ever recorded. During Black Monday in 1987, the Dow fell by 508 points. Since the index had risen significantly, the point drop is relatively larger.

The volatility index (VIX), known as the 'fear index,' surged by 42%, reflecting market anxiety. The VIX showed a strong upward trend since the 21st and then exploded with a sharp rise.

The stock market decline on this day is interpreted as reflecting fears that the confirmed case with a high possibility of local transmission in the U.S., reported the previous day, could lead to a global pandemic. Although U.S. President Donald Trump assured at a press conference the day before that preparations for COVID-19 are very well in place and the risk to Americans remains low, the market remains skeptical.

Amid a preference for safe assets, the 10-year U.S. Treasury yield briefly fell below 1.25% during the day, continuing a super-strong trend. U.S. Treasury bonds are repeatedly hitting historic lows.

The Wall Street Journal (WSJ) reported that the U.S. Centers for Disease Control and Prevention (CDC) relaxed testing criteria for COVID-19 infections on this day, and that the federal and local governments have begun full-scale COVID-19 responses, evaluating that the U.S. stock market has entered a full correction phase.

Major Asian stock markets are also plummeting. Japan's Nikkei 225 index was trading at 21,215.46 at 10:32 a.m., down 3.34% from the previous trading day. China's Shanghai Composite Index started trading down 2.23% at 2,924.64.

The KOSPI also continued its downward trend, falling nearly 2%. Depending on the selling pressure from foreign investors, the 2,000-point level appears precarious. As of 10 a.m. on the 28th, the KOSPI recorded 2,020.47, down 1.68% (34.42 points) from the previous day, and the KOSDAQ index fell 1.54% (9.82 points) to 628.35.

This week, foreign investors have sold nearly 3 trillion won in the securities market. They also net sold about 70 billion won this morning. Samsung SDI fell 3.39% this morning, and other large-cap stocks such as LG Chem (-3.35%), Hyundai Motor (-3.31%), and Hyundai Mobis (-2.74%) could not escape the downward trend. The won-dollar exchange rate slightly declined. In the Seoul foreign exchange market, the won-dollar exchange rate was trading at 1,213.7 won per dollar at 10 a.m., down 3.5 won from the previous day.