[Good Morning Market] Stock Market Pressured by Global Economic Slowdown Concerns... Volatile Trading Continues

[Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] As Russia's invasion accelerates, all three major indices of the U.S. New York Stock Exchange closed lower on the 1st (local time). In particular, the exclusion of Russia from SWIFT (Society for Worldwide Interbank Financial Telecommunication) led to a sharp rise in international oil and grain prices, expanding the preference for safe-haven assets and increasing the decline. Accordingly, the Korean stock market is also expected to start lower on the 2nd.

Sangyoung Seo, Director at Mirae Asset Securities: "Possibility of Global Economic Slowdown Poses Burden on Korean Stock Market"

The view that the Ukraine crisis is unlikely to end soon is gaining traction, acting as a factor that dampens investor sentiment. Furthermore, Ukrainian President Zelensky's statement that there will be no talks without a full ceasefire, making the Russia-Ukraine talks scheduled for the 3rd uncertain, is expected to act as a negative factor.

The U.S. stock market fell as international oil and grain prices surged due to the exclusion of Russia from SWIFT, highlighting the possibility of a global economic slowdown caused by increased costs, which burdens the Korean stock market. Although the U.S. stock market showed resilience the previous day, the surge in commodity prices ultimately leads to higher inflation and increases the likelihood of economic slowdown, stimulating stagflation. Considering this, the Korean stock market is expected to start down about 1%, and volatility is expected to continue. In particular, attention should be paid to related developments as the Korean stock market may also show changes depending on U.S. President Joe Biden's State of the Union address during the trading session (Korean time).

Jiyoung Han, Researcher at Kiwoom Securities: "Expansion of Safe-Haven Asset Preference Makes Weakness in Korean Stock Market Inevitable"

The talks between Ukraine and Russia on the 28th only reaffirmed their differences in position without any progress in negotiations. Additionally, Russia's continued airstrikes on Kyiv and other major cities have led Western countries to increase sanctions against Russia, pressuring them further. This geopolitical risk is intensifying risk aversion in the stock market. West Texas Intermediate (WTI) crude oil also surged more than 6% intraday, surpassing $100, and the overall sharp rise in commodity prices, including oil, is making it difficult for the market to respond.

Accordingly, the Korean stock market is expected to show a downward trend due to the expansion of safe-haven asset preference amid the worsening Ukraine situation. News related to Ukraine, including Biden's State of the Union address scheduled for the morning Korean time during the trading session, is expected to impact the Korean stock market. Although downward pressure is expected to increase overall, the surprise in Korea's February exports, the return to a trade surplus, and the better-than-expected U.S. February ISM Manufacturing Index, which were announced during the holiday, are expected to limit the downside pressure on the domestic stock market.