[Good Morning Stock Market] US Treasury Yield Rises... KOSPI Expected to Start Lower

[Image source=Yonhap News]

On the 4th, the KOSPI is expected to start lower due to rising U.S. Treasury yields and a stronger dollar.

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,002.38, down 430.97 points (1.29%) from the previous session. The Standard & Poor's (S&P) 500 index fell 58.94 points (1.37%) to 4,229.45, and the Nasdaq index dropped 248.31 points (1.87%) to 13,059.47.

The New York stock market widened its losses as the August Job Openings and Labor Turnover Survey (JOLTS) report showed a larger-than-expected increase in job openings, and hawkish remarks from Federal Reserve (Fed) officials pushed Treasury yields higher.

The August job openings released that day totaled 9.61 million, an increase of about 690,000 from the previous month. Additionally, the U.S. 10-year Treasury yield surpassed 4.8%, reaching its highest level since August 2007. The 30-year Treasury yield also exceeded 4.9%, marking its highest point since September 2007. The 30-year fixed mortgage rate rose to 7.72%, approaching 8%.

As a result, the Nasdaq, which is sensitive to interest rate hikes and tech-heavy, plunged sharply, and the Dow Jones gave up all its gains for the year. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) exceeded 20, its highest level in 16 months.

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) and MSCI Emerging Markets Index ETF fell 1.01% and 1.32%, respectively. Eurex KOSPI 200 futures declined 0.27%. Considering this, the KOSPI is expected to open down by 0.5% to 0.8% on the day.

Seokhwan Kim, a researcher at Mirae Asset Securities, forecasted, "Despite positive factors such as improved export conditions in September and the U.S. federal government's avoidance of a shutdown, concerns over prolonged Fed tightening, rising long-term bond yields, and a stronger dollar will destabilize investor sentiment in the stock market."

He added, "Especially as long-term bond yields in major countries are at multi-year highs, this will increase upward pressure on domestic government bond yields. The won-dollar exchange rate is also expected to approach the 1,360 won level, the highest since mid-November last year, which could pose a burden on foreign investor flows."

Jiyoung Han, a researcher at Kiwoom Securities, stated, "Ahead of the third-quarter earnings season, the impact of earnings momentum is expected to increase again, so a focused approach on sectors with ongoing sales momentum is necessary. In October, favorable trends are expected in IT (semiconductors, displays), machinery, and automobiles."

Meanwhile, the one-month non-deliverable forward (NDF) won-dollar exchange rate in New York stood at 1,359.37 won, reflecting an expected 9 won rise in the won-dollar rate at the start of the day.