[Good Morning Stock Market] "Limited Impact from Middle East Geopolitical Issues... KOSPI Expected to Start Higher"

On the 11th, the Korean stock market is expected to start higher. Although a geopolitical issue has arisen in the Middle East, its impact is expected to be limited. Instead, a favorable global stock market trend and expectations for China's economic stimulus measures are anticipated to have a positive effect.

[Image source=Yonhap News]

On the 10th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, centered on blue-chip stocks, closed at 33,739.30, up 134.65 points (0.40%) from the previous trading day. The S&P 500 index, focused on large-cap stocks, rose 22.58 points (0.52%) to 4,358.24. The Nasdaq index, centered on technology stocks, closed at 13,562.84, up 78.61 points (0.58%).

The rise in the U.S. stock market was driven by a decline in Treasury yields. The geopolitical risk from the Middle East strengthened the preference for safe-haven assets. In the New York bond market, the benchmark 10-year yield fell to around 4.65%. The 2-year yield, which is sensitive to monetary policy, dropped to about 4.95%.

Comments from a Federal Reserve (Fed) official also acted as a positive factor. Raphael Bostic, president of the Atlanta Fed, stated at an American Bankers Association event that "there is no need to raise interest rates further to slow the economy and reduce inflation." He is considered a dove within the Fed.

On this day, the KOSPI is expected to start higher by about 0.5 to 0.8% compared to the previous trading day. Kim Seok-hwan, a researcher at Mirae Asset Securities, predicted, "The favorable global stock market trend and expectations for China's economic stimulus measures will create positive investor sentiment."

In particular, the geopolitical issue from the Middle East is also expected to be limited. Han Ji-young, a researcher at Kiwoom Securities, said, "Looking at the stock market trends during the last four Middle East wars, the direct impact on the stock market was limited," adding, "The most probable scenario is that the current war will remain a localized conflict confined to skirmishes between the two countries." She further explained, "In this case, only short-term volatility in oil prices will appear, and it is expected not to affect the overall direction of the stock market."

The securities industry advised focusing on earnings announcements and defense stocks, which will intensify starting today. The earnings season is expected to officially begin with Samsung Electronics' earnings announcement. Researcher Kim Seok-hwan said, "Samsung Electronics is scheduled to announce its preliminary third-quarter earnings, and attention should be paid to whether foreign investors strengthen their positions after major companies release their preliminary earnings."

Researcher Han Ji-young noted, "In addition to large-scale K-9 contracts with Poland and Egypt, Korea has secured advantageous footholds in key regions such as North America, Asia, the Middle East, and Europe," explaining, "The continuation of geopolitical uncertainty can create a tight supply environment compared to weapons demand."