[Good Morning Stock Market] US Stocks Surge on Oil Price Drop... Will KOSPI Rebound Too?

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] The U.S. stock market closed higher on the 15th (local time) due to the decline in international oil prices. On the New York Mercantile Exchange (NYMEX), April delivery West Texas Intermediate (WTI) crude oil fell 6.4% ($6.57) per barrel from the previous session to $96.44. Compared to the peak reached on the 8th, the highest since August 2008, it has dropped more than 20%. This is analyzed to be due to growing concerns over reduced demand as China implements lockdown measures to curb the spread of COVID-19. The Dow Jones Industrial Average rose 1.82%, the Standard & Poor's (S&P) 500 index increased by 2.14%, and the tech-heavy Nasdaq index gained 2.92%. On the 16th, the domestic stock market is expected to be influenced by the sharp rise in the U.S. stock market.

◆ Han Ji-young, Kiwoom Securities Researcher = It has become a foregone conclusion that the Federal Open Market Committee (FOMC) will raise interest rates by about 0.25 percentage points this week. With the Federal Reserve (Fed) stating it will take action until inflation is controlled, market participants remain cautious. However, the sharp drop in international oil prices is a factor that can ease concerns about a surge in expected inflation. Also, the U.S. Producer Price Index (PPI) for February rose more than 10% year-on-year but met expectations.

Due to some easing of inflation concerns and the rise in the U.S. stock market, the domestic stock market is expected to rebound centered on growth stocks on this day. Although there are concerns about a possible default due to Russia’s dollar-denominated bond interest payment deadline on the 16th of this month, a 30-day grace period has been granted. Additionally, Russia’s exposure is about $120 billion (approximately 149.46 trillion KRW), which has decreased by nearly half since the 2014 Crimea crisis, so the stock market shock is expected to be limited. However, attention is needed regarding the lockdown of Chinese cities due to the spread of COVID-19 and whether the Chinese stock market will rebound.

◆ Seo Jung-hoon, Kiwoom Securities Researcher = The New York stock market rebounded due to the decline in oil prices. Furthermore, the U.S. February PPI rose 10.0% year-on-year, reaching a record high but in line with expert expectations. On a month-to-month basis, it rose by only 0.8%, showing a slowdown compared to January’s 1.2%. With the March FOMC results being released, as uncertainty in monetary policy has eased compared to before, index volatility is expected to subside. However, since the U.S. tightening stance remains a constant for the time being, caution is needed when investing in growth-type stocks.