[Good Morning Stock Market] "Negative Factors Turned Positive"... Kospi Expected to Start Higher

The domestic stock market is expected to start higher on the 30th. This is because the New York stock market rose due to eased concerns about Federal Reserve (Fed) tightening following a slowdown in U.S. job growth.

[Image source=Yonhap News]

On the 29th (local time), the Dow Jones Industrial Average closed at 34,852.67, up 292.69 points (0.85%) from the previous trading day. The S&P 500, focused on large-cap stocks, rose 64.32 points (1.45%) to 4,497.63, and the tech-heavy Nasdaq index jumped 238.63 points (1.74%) to close at 13,943.76.

The slowdown in employment and consumer indicators released that day raised expectations that the Fed might end its tightening, which acted as a positive factor for the stock market. Additionally, the decline in U.S. Treasury yields led to a rally in tech stocks.

According to the Job Openings and Labor Turnover Survey released by the U.S. Department of Labor, private sector job openings in July were 8.8 million, down 338,000 (5.3%) from the previous month. This is the lowest figure since March 2021 (8.4 million) and significantly below market expectations (9.5 million).

The consumer sentiment index also declined. The Conference Board (CB) announced that the U.S. Consumer Confidence Index for August was 106.1, down 7.9 points from the revised July figure of 114.0 and well below the market forecast of 116.0.

Han Ji-young, a researcher at Kiwoom Securities, said, "In the first and second quarters of this year, sensitivity to the side effects of Fed tightening increased rather than restraint on tightening, so positive indicators were also positive for the stock market." She added, "However, now the prevailing view is shifting toward 'the U.S. will not fall into a recession, and it is too early for the Fed to declare victory in the fight against inflation.'" She continued, "As a result, positive indicators are being interpreted as negative for the stock market, and ironically, the stock market is in a situation where it hopes to witness a slowdown in the real economy."

Han also evaluated, "The fact that job creation in July was weaker than expected is considered a positive for the stock market. Other employment indicators such as hiring and quitting rates are also slowing, indicating that labor market imbalances are gradually being resolved, which leads market participants to expect a decline in wage-driven service inflation."

For this reason, the KOSPI is also expected to start about 0.7% higher. Expectations are that U.S.-originated positive factors such as eased Fed tightening concerns due to slower U.S. job growth, falling market interest rates, and strength in the Philadelphia Semiconductor Index will have an impact. Seo Sang-young, a researcher at Mirae Asset Securities, emphasized, "The U.S. stock market's strength, supported by weak employment and sentiment indicators that reduce the possibility of further Fed tightening, will have a favorable effect on the Korean stock market."