[Good Morning Stock Market] Rising US Treasury Yields and Middle East Tensions... "KOSPI Expected to Start Lower"

[Image source=New York Reuters·Yonhap News]

On the 23rd, the KOSPI is expected to start lower due to rising U.S. Treasury yields and concerns over the war between Israel and the Palestinian militant group Hamas.

On the 20th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 33,127.28, down 286.89 points (0.86%) from the previous session. The Standard & Poor's (S&P) 500 index fell 53.84 points (1.26%) to 4,224.16, and the Nasdaq index dropped 202.37 points (1.53%) to 12,983.81.

The rise in U.S. Treasury yields and weak corporate earnings suppressed investor sentiment, increasing downward pressure, with major U.S. indices falling more than 1%. After Federal Reserve (Fed) Chair Jerome Powell stated on the 19th that he does not think interest rates are too high and left open the possibility of further tightening, the U.S. 10-year Treasury yield surpassed 5% intraday for the first time in over 16 years since July 2007.

Poor corporate earnings and geopolitical uncertainties in the Middle East also had an impact. All 11 sectors of the S&P 500, including IT and consumer discretionary, declined. Solar and regional bank stocks also underperformed. Due to the Israel-Palestine war, international gold prices surpassed $2,000 per ounce intraday for the first time since July. Gold, a representative safe-haven investment, has risen about 7% this month.

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) and MSCI Emerging Markets Index ETF fell 1.44% and 1.21%, respectively. Eurex KOSPI 200 futures dropped 0.47%. Accordingly, the KOSPI is expected to start down about 0.4% to 0.8%.

Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "Last week, the domestic stock market widened its losses amid broad selling pressure, with the KOSDAQ index falling 6.5%, marking its largest weekly loss since September 30 of last year," adding, "As a result, forced selling by individual investors increased."

Researcher Kim expressed concern, saying, "In particular, the balance of short-term margin trading increased sharply from 517.4 billion won on the 17th to 762.3 billion won on the 18th, and exceeded 1 trillion won on the 19th, which will burden market supply and demand." He added, "Downward pressure is quite high not only in the U.S. stock market but also in global markets. The Chinese stock market hit new lows for the year despite improvements in real indicators, liquidity supply, and stimulus announcements, and the European stock market also recorded its lowest levels in several months."

Meanwhile, the one-month non-deliverable forward (NDF) USD/KRW exchange rate in New York was 1,348.26 won, reflecting an expected 5 won decline at the start of trading in the USD/KRW exchange rate.