[Good Morning Stock Market] Tech Stocks Revived by Weak US Employment Data... KOSPI Expected to Rise

Nasdaq Index Rises Over 1%... Tech Stocks Rally
Concerns Over Interest Rate Hike Ease Amid Weak Employment Data

The U.S. stock market declined following the surprise interest rate hike announcement by the Bank of Canada the previous day, but showed strength in technology stocks after last night's employment data came in weak. The Nasdaq index rose 1.02%, while the Dow Jones Industrial Average (0.5%) and S&P 500 (0.62%) also increased. Considering these factors, the domestic stock market is expected to rise influenced by the gains in U.S. indices.

Seosangyoung, Head of Media Content Division at Mirae Asset Securities: “Rise in U.S. Tech Stocks Positive for Domestic Market”

[Image source=Yonhap News]

On the 7th (local time), the U.S. stock market fell reflecting concerns that the Federal Reserve (Fed) might discuss additional rate hikes in the second half of the year following interest rate increases by the Bank of Canada and Australia. The surprise rate hike by Canada had a significant impact on the market, which had been pricing in the possibility of rate cuts.

However, on the 8th, the number of new U.S. unemployment claims was confirmed to have reached 261,000, exceeding the previously announced 233,000 and marking the highest level since October 2021, which helped the market stabilize. Employment data plays a crucial role in the Fed's rate decisions. Technology stocks showed strong gains.

By individual stocks, Tesla rose 4.6% supported by China's Ministry of Commerce's electric vehicle consumption promotion policy. News of a large-scale factory construction in Spain and plans to meet a Cybertruck production volume of 375,000 units for suppliers acted favorably. Amazon surged 2.5%, buoyed by Wells Fargo's overweight recommendation based on optimistic online consumption and cloud service growth. Apple (1.6%) was lifted by expectations of increased iPhone 15 sales. Conversely, Micron, which had been rising on hopes of an improved semiconductor market, fell 2.6% due to reports that China's chip demand has decreased nearly 20% through May this year. AMD and Nvidia each rose over 2% on expectations of expanding artificial intelligence (AI) demand.

Considering these points, the domestic stock market is expected to show an upward trend supported by strength in technology stocks. However, since the gains were limited to certain stocks, a stock-specific market is likely to emerge. Furthermore, the slowdown in employment data should be kept in mind as it may trigger recession concerns.

Yang Haejung, Researcher at DS Investment & Securities: “If Fed Holds Rates in June, Asian Markets Could Rally”

Since the beginning of this year, as the Fed has slowed the pace of rate hikes, the possibility of a rally in Asian markets including China has increased. In the case of the Chinese market, the yuan-dollar exchange rate currently exceeds 7 yuan, showing a record weakness. The yuan's weakness can be interpreted not as an external factor but as a signal that internal economic recovery in China is needed. It is a point where traditional easing monetary policies such as rate cuts, like in 2016, can be implemented. This is expected to become possible if the Fed stops raising rates. Since 2010, China has pursued policies different from those of the U.S., and if stimulus measures are introduced when the yuan's value has less room to fall further, the yuan is expected to strengthen.

Following the yen's sharp decline last year, the Bank of Japan's (BOJ) actions support this outlook. When the Fed aggressively raised rates, the BOJ maintained an accommodative policy, causing the yen to plummet. This year, the BOJ has further expanded government bond purchases, reducing concerns about yen depreciation due to the widening interest rate gap. Considering the experience of the Japanese stock market rising under accommodative policies, depending on the Fed's decision in June, Asian markets including China are expected to have opportunities for a rally.