[Good Morning Stock Market] "Eased Strong Dollar, Domestic Stock Market Expected to Rise Including Semiconductor Stocks"

Nasdaq up 3.3%, S&P 500 up 3.06%
Focus on US employment data this week amid high-intensity tightening concerns

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] The U.S. stock market showed gains for the second consecutive trading day. This was due to indicators suggesting an economic recession amid high-intensity tightening. As the euro strengthened and the dollar index declined, investor sentiment toward risk assets is expected to improve compared to before.

Sangyoung Seo, Researcher at Mirae Asset Securities: “Fed members worried about rapid rate hikes, expecting domestic stock market gains”

The U.S. stock market rose as remarks from some Federal Reserve (Fed) members concerned about too rapid rate hikes were interpreted as positive news. The Nasdaq index rose 3.34%, the Dow Jones increased by 2.8%, and the S&P 500 climbed 3.06%.

John Williams, President of the New York Fed, argued that inflation will fall to 3% next year as global demand cools and supply steadily improves. As employment and the housing market began to slow down, making a consumption decline more apparent, some members advocated for controlling the pace of rate hikes. In fact, the U.S. job postings for August released that day recorded 10.053 million, falling short of the previous month’s 11.17 million.

Accordingly, the dollar’s strength is expected to ease. Concerns over weak economic indicators were influenced by the EU energy chief’s announcement that mild weather has ensured sufficient natural gas stocks without using Russian gas, which strengthened the euro.

On the same day, the semiconductor sector continued its upward trend from the previous day. It was assessed that the industry’s instability had already been reflected in stock prices. Intel rose 2.71%, and most others, including Micron (4.33%) and Nvidia (5.23%), surged sharply.

Consequently, the domestic stock market is expected to show an upward trend influenced by the positive U.S. stock market. By sector, the semiconductor industry is forecasted to rise, influenced by the gains of global semiconductor companies. Additionally, the automotive sector, including electric vehicles, is expected to continue a positive trend as it showed significant gains amid expectations of easing supply chain concerns.

Yongtaek Jung, Economist at IBK Investment & Securities: “This week’s U.S. employment data release should be closely watched”

Tightening concerns from the Fed and the European Central Bank (ECB), which could fuel dollar strength, are still ongoing. The U.S. August Personal Consumption Expenditures (PCE) remained high, similar to the August Consumer Price Index (CPI), while the Eurozone’s September CPI exceeded 10%, confirming inflationary pressures. Additionally, the University of Michigan’s one-year ahead inflation expectations surpassed forecasts, adding to the burden.

Meanwhile, domestic exports and imports for September showed disappointing results. Although the decline in raw material prices eased trade conditions, exports of key items such as semiconductors and petrochemicals fell for the second consecutive month, raising concerns about capital outflows and economic uncertainty. This is a factor that could drive dollar strength.

The immediate event the market should focus on is the U.S. employment data. Experts expect a strong recovery trend. However, the impact on market prices is likely to be limited. If the data is positive, tightening pressures will be reinforced again, but this is already sufficiently priced in. Even if the data is weak, considering Fed Chair Jerome Powell’s strong commitment to price stability, it is unlikely to ease tightening concerns.