[Good Morning Stock Market] Watching the 3rd US Debt Ceiling Negotiation... "KOSPI Volatility Limited"

Overnight, the U.S. stock market fluctuated amid news regarding the Biden administration's debt ceiling negotiations and closed mixed. As President Joe Biden and congressional leaders continue their third round of discussions on raising the debt ceiling, the KOSPI on the 23rd is expected to show volatility in early trading as it closely watches the outcome of these negotiations.

On the previous day (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,286.58, down 140.05 points (0.42%) from the previous session. The Standard & Poor's (S&P) 500 index rose 0.65 points (0.02%) to 4,192.63, and the Nasdaq index ended trading at 12,720.78, up 62.88 points (0.50%) from the previous session.

Micron fell 2.85% following news that the Chinese government banned the use of its products citing security reasons, while Chinese companies such as Alibaba (2.52%) and Pinduoduo (4.15%) rose. Tesla gained 4.85% after CEO Elon Musk mentioned that the company will play an important role in the artificial intelligence (AI) industry.

President Joe Biden [Photo by Yonhap News]

Market attention on the day was focused on the third negotiation between U.S. President Biden and Republican House Speaker Kevin McCarthy. After failing to reach an agreement in the previous two meetings, the market initially rose when President Biden made positive remarks about the negotiations, but then saw selling pressure following McCarthy’s claim that "the negotiations are not optimistic," resulting in a sensitive reaction to individual news and limited fluctuations.

U.S. Treasury Secretary Janet Yellen warned that the U.S. government’s cash reserves are running low and that if the debt ceiling is not raised, a default could occur as early as July 1. For the debt ceiling increase bill to pass both the House and the Senate, an agreement must be reached by the end of this week at the latest.

Regarding the progress of the debt ceiling negotiations in the U.S., a press conference by Speaker McCarthy is scheduled for the morning of the same day in Korean time. The domestic stock market is also expected to be affected in early trading depending on related news. Seo Sang-young, head of the Media Content Division at Mirae Asset Securities, said, "As the U.S. stock market shows mixed trends while awaiting the debt ceiling negotiations, the volatility of the Korean stock market is also expected to be limited. Since the debt ceiling negotiations will ultimately be resolved, even if no agreement is reached this time and volatility increases, the extent will be limited." He added, "Rather, attention should be paid to the acceleration of the U.S. economic slowdown due to fiscal spending cuts resulting from the debt ceiling negotiations. The Korean stock market is expected to experience early changes depending on the content of Speaker McCarthy’s press conference, followed by a process of absorbing selling pressure."