[Good Morning Stock Market] Strong Earnings from US Semiconductor Companies... Will They Lead a Rebound in the Domestic Market?

[Asia Economy Reporter Ji Yeon-jin] The U.S. stock market closed lower as concerns over an economic slowdown grew due to the possibility of Omicron-related lockdowns in various European countries. The Dow Jones Industrial Average fell 1.23%, while the Nasdaq and S&P 500 indices dropped 1.24% and 1.14%, respectively. In the domestic market, concerns about Omicron were already reflected the previous day, and with U.S. semiconductor company Micron announcing improved earnings after market close, the domestic semiconductor sector is expected to show strength.

◆ Sangyoung Seo, Researcher at Mirae Asset Securities = The U.S. stock market was pressured by Senator Joe Manchin's announcement opposing the U.S. social spending bill. Additionally, concerns about an economic slowdown due to Omicron and the Federal Reserve's hawkish stance raising fears of negative impacts on the U.S. economy contributed to overall investor sentiment weakening. Ahead of year-end, increased rebalancing by major hedge funds also added supply-demand pressure. However, some pullbacks occurred before market close, reducing the losses.

The MSCI Korea Index ETF fell 1.97%, and the MSCI Emerging Markets Index ETF dropped 1.50%. The 1-month NDF USD/KRW exchange rate stood at 1,089.74 KRW, suggesting a 2 KRW decline at the open. European Kospi 200 futures rose 0.10%, indicating a slight rise in the Kospi at the start of trading.

The factors behind the U.S. stock market decline?Senator Joe Manchin's opposition to the social spending bill, expanded lockdowns due to Omicron, and concerns over economic slowdowns in China and the U.S.?were largely priced in the previous day, so their impact on the Korean stock market is expected to be limited. Despite Omicron concerns, the market rose on expectations of strong earnings from Carnival, and Micron’s after-hours 7% gain on solid results is noteworthy. Considering this, the Korean stock market is expected to show strength, especially in semiconductor-related stocks with high earnings improvement expectations, after a firm opening. If the USD/KRW exchange rate stabilizes, the gains could widen, so attention should be paid to foreign exchange market trends.

◆ Yumi Kim, Researcher at Kiwoom Securities = The U.S. dollar showed a slight decline as safe-haven demand spread in financial markets amid news of Omicron-related lockdowns, but expectations for the U.S. economy weakened due to reduced chances of passing the Biden administration’s social welfare spending bill. The 1-month NDF USD/KRW exchange rate is expected to open 1 KRW lower at 1,190.42 KRW, but the decline will likely be limited due to caution ahead of President Joe Biden’s upcoming speech.

International oil prices fell 2.98% from the previous day to around $68 per barrel amid growing concerns that the Omicron variant’s spread could slow the economy. Gold prices declined below $1,800 per ounce despite a slight weakening of the dollar and increased Omicron concerns, pressured by a rebound in the U.S. 10-year Treasury yield.

◆ Donggil Noh, Researcher at Shinhan Financial Investment = The spread of the Omicron variant could affect both demand and supply, making it difficult to immediately assess whether inflation will ease or worsen. It is a challenging environment to bet on index direction. However, considering that the impact on consumption slowdown is likely to come first and the recent decline in energy prices, the possibility of easing inflation concerns early next year remains valid. In this context, a strategy focusing on IT sectors such as semiconductors, which suffered the most during price corrections, is effective. Under these conditions, the Korean stock market is likely to continue recovering relative returns.