[Good Morning Stock Market] US Stocks Rise on Eased Recession Concerns and Powell's Remarks... KOSPI Expected to Follow Upward Trend

[Image source=Yonhap News]

[Asia Economy Reporter Myunghwan Lee] On the 18th, the domestic stock market is expected to continue its upward trend with a stock-specific market unfolding. This is because the U.S. stock market showed strength due to easing real economic indicators the previous day, which is likely to be favorable for the Korean stock market as well.

On the 17th (local time), the New York stock market closed higher amid eased concerns about a U.S. recession. The Nasdaq index, centered on technology stocks, rose 2.76% compared to the previous trading day, while the S&P 500 and Dow Jones Industrial Average also increased by 2.02% and 1.34%, respectively.

U.S. retail sales and industrial production indices for April increased by 0.9% and 1.1% month-on-month, respectively. These figures were stronger than initially expected, and the improvement in real economic indicators is analyzed to have eased recession concerns. Chairman Powell stated that he would not hesitate to raise interest rates above the neutral rate level if necessary to curb inflation.

Sangyoung Seo, Head of Media Content Division at Mirae Asset Securities: "U.S. recession concerns eased... KOSPI expected to start with about 1% rise"

On the 18th, the Korean stock market is expected to start with about a 1% rise and then show strength mainly in stocks with favorable news, resulting in a stock-specific market. The U.S. stock market showed strength due to the inflow of favorable news for some companies and the easing of recession concerns following improvements in U.S. real economic indicators, which is favorable. In particular, the Philadelphia Semiconductor Index rose 5.02%, supported by analysts' views that the semiconductor sector presents a buying opportunity due to excessive declines, which is also positive for related stocks.

News of Warren Buffett, CEO of Berkshire Hathaway, actively purchasing individual stocks also raised expectations for oversold conditions, positively impacting investor sentiment. Considering the possibility of an interest rate hike at the European Central Bank (ECB) monetary policy meeting on the 18th and Chairman Powell's hawkish remarks, there is also a strong desire to sell.

Improved U.S. real economic indicators and statements from Fed officials have eased the 'recession' issue, which was one of the recent factors causing declines. As a result, the dollar weakened, government bond yields and stock markets rose, indicating increased risk asset preference.

Jiyoung Han, Researcher at Kiwoom Securities: "U.S. stock market surged... Domestic market expected to show upward trend"

On the 18th, the domestic stock market is expected to show an upward trend, supported by the surge in the U.S. stock market amid improved U.S. real economic indicators. The won-dollar exchange rate, which once entered the excessive overshooting zone at the 1,280 won level, has fallen to the 1,260 won level, which is expected to create a favorable environment for investor sentiment. The fact that semiconductor stocks such as Micron and AMD surged together in the U.S. stock market is also judged to have a positive impact on foreign demand for domestic semiconductor stocks and large-cap stocks in general.

It is true that existing macroeconomic uncertainties since the beginning of the year, such as delayed inflation level down, China's lockdown policies, and concerns about economic slowdown, still remain in the real economy. However, market participants seem to be relieved simply because no negative factors have emerged, as they have already absorbed a significant portion of the stock price adjustment. Chairman Powell's remarks did not differ significantly from what he had emphasized before, so the market treated them as a constant during the session.

Attention should also be paid to the fact that U.S. retail sales and industrial production indices for April showed better-than-expected figures. This suggests that although economic momentum is inevitably slowing down toward the end of the year, it is premature to price in a recession scenario.