[Good Morning Stock Market] US Consumer Spending Increase, Semiconductor Regulation Concerns... KOSPI Expected to Start Lower

Strong US Consumer Spending... Prolonged Tightening Expected
Nvidia Plummets 4.7% on Additional Semiconductor Regulations
Focus on China's Economic Data Release During Trading Session

[Image source=Yonhap News]

On the 18th, the Korean stock market is expected to start lower. This is due to concerns over additional interest rate hikes following U.S. retail sales significantly exceeding expectations. Additionally, the U.S. Department of Commerce announced further semiconductor regulations, causing the U.S. S&P 500 and Nasdaq indices to close lower.

On the previous day (local time), the Dow Jones Industrial Average closed at 33,997.65, up 13.11 points (0.04%) from the previous session. The large-cap focused S&P 500 index fell 0.43 points (0.01%) to 4,373.20, and the tech-heavy Nasdaq index dropped 34.24 points (0.25%) to 13,533.75.

According to the U.S. Department of Commerce, September retail sales increased by 0.7% month-over-month to 704.9 billion won. This figure exceeded the expert forecast of 0.2% compiled by The Wall Street Journal (WSJ) by 0.5 percentage points. Contrary to expectations of a slowdown in U.S. retail sales, solid consumer spending growth continued last month.

Retail sales, which account for about one-third of total U.S. consumption, serve as a key indicator of the health of the U.S. economy. The stronger-than-expected U.S. consumer spending has led the market to expand expectations that the Federal Reserve's tightening policy will be stronger and last longer.

In response, U.S. Treasury yields reacted. The 2-year and 10-year U.S. Treasury yields rose by 11 basis points (1bp=0.01 percentage points) and 13 basis points respectively from the previous day, reaching 5.21% and 4.83%. These are the highest levels since 2006 and 2007, respectively.

On the 17th (local time), the U.S. Department of Commerce announced additional semiconductor regulations, including a ban on the export of low-spec AI.

Additional semiconductor regulations also acted as a negative factor. The U.S. Department of Commerce announced that it would ban exports of lower-specification artificial intelligence (AI) chips compared to the previously announced China export control measures. Following the announcement, Nvidia's stock price plunged nearly 5%, negatively impacting investor sentiment. This announcement included Nvidia's lower-spec AI chips, the A800 and H800, in the export controls. This has raised concerns that trade tensions between the U.S. and China could intensify.

Considering this, a lower start for the Korean stock market seems inevitable. Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "The KOSPI is expected to start down by about 0.1% to 0.3%. While Nvidia's sharp decline is unlikely to have a direct impact on the Korean stock market, attention should be paid to China's third-quarter gross domestic product (GDP), retail sales, and industrial production data scheduled for release during the trading session."

Han Ji-young, a researcher at Kiwoom Securities, diagnosed, "There are mixed factors including downside risks such as rising interest rates and additional U.S. AI export controls on China leading to weakness in AI stocks, as well as upside factors like expectations for the third-quarter earnings season and a falling exchange rate. The market is expected to show limited price movement while digesting China's real economy data during the session."