[Good Morning Stock Market] US Stocks Weaken Ahead of FOMC... Will KOSPI Be Burdened?

On the 13th, residents of Shenzhen City, Guangdong Province, China, lined up in long queues to undergo COVID-19 nucleic acid testing.
[Image source=AFP Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] The U.S. New York stock market closed mostly lower due to the Federal Reserve's (Fed) interest rate hike movements and other factors. On the 14th (local time), the S&P 500 index, centered on large-cap stocks, closed at 4,173.11, down 31.20 points (0.74%), and the Russell 2000 index, focused on small-cap stocks, also closed at 1,941.72, down 37.95 points (1.92%). The tech-heavy Nasdaq index closed at 12,581.22, down 262.59 points (2.04%) from the previous session, as concerns over supply chain disruptions grew due to the lockdown in Shenzhen, Guangdong Province, China, home to iPhone supplier Taiwan Foxconn, until the 20th because of COVID-19. The Dow Jones Industrial Average closed slightly up by 1.05 points (0.0%) at 32,945.24.

◆ Seo Sang-young, Researcher at Mirae Asset Securities = Ahead of the Federal Open Market Committee (FOMC) meeting on the 15th-16th, the rise in U.S. Treasury yields and the decline in the Nasdaq index are expected to weigh on the domestic stock market. The U.S. 10-year Treasury yield surpassed 2.14%, reaching its highest level since July 2019, due to inflation concerns and the possibility of Fed tightening. Additionally, the decline of Chinese companies listed on the U.S. stock market may heighten concerns about the sluggish Chinese stock market, which could act as a factor affecting investor sentiment.

While expectations that the Fed will implement monetary policy to curb inflation without triggering a recession are positive, the key issue is how it will respond to the aftermath of the Ukraine situation. Considering that the Fed is expected to proceed in an orderly manner, it is anticipated that active responses will be restrained while awaiting the FOMC. Taking this into account, the domestic stock market is expected to decline by around 0.5%, followed by a market that changes based on movements in the Chinese stock market and individual stocks.

◆ Seo Jung-hoon, Researcher at Kiwoom Securities = Ahead of the FOMC, U.S. Treasury yields rose sharply across both short and long terms. The dollar index showed a slight decline of 0.13%, and the April West Texas Intermediate (WTI) crude oil price on the New York Mercantile Exchange closed at $103.01 per barrel, down $6.32 (5.8%) from the previous session. Expectations have emerged that oil demand will decrease due to China's lockdown measures amid the spread of COVID-19. Given the various events, it is necessary to keep in mind a volatile market. Uncertainty is expected to ease after the FOMC's decision on the benchmark interest rate hike is confirmed and the lockdowns in major Chinese cities are lifted.

◆ Han Ji-young, Researcher at Kiwoom Securities = The domestic stock market is expected to face downward pressure influenced by external uncertainties such as concerns over China's lockdown and the continued adjustment in the U.S. Nasdaq. Additionally, the heightened caution regarding the FOMC, as evidenced by U.S. Treasury yields reaching yearly highs, will also act as a burden. However, since the Shenzhen area is not under a full lockdown and some factories are still operating, it is judged that the supply shortage within China is unlikely to worsen significantly. The domestic stock market has entered an oversold territory, and if the Ukraine situation and China's real economy indicators for January-February, to be announced on the 15th, are positive, the downside of the index is expected to be solid.