[Good Morning Stock Market] European Stocks Fall... KOSPI Expected to Start Slightly Lower

On the 15th (local time), while the U.S. New York stock market was closed for Martin Luther King Day, European stock markets all closed lower. The escalation of geopolitical conflicts in the Middle East, Germany's negative GDP growth, and hawkish (monetary tightening-preferred) remarks from European Central Bank (ECB) officials dragged the markets down. Due to the ECB official's dismissal of the possibility of interest rate cuts and increased volatility in secondary battery stocks following L&F's earnings shock, the domestic market on the 16th is expected to show a limited rebound.

Germany's DAX index closed at 16,622.22, down 82.34 points (0.49%) from the previous session, while France's Paris CAC40 index ended at 7,411.68, down 53.46 points (0.72%).

The UK's FTSE 100 index closed at 7,594.91, down 30.02 points (0.39%). The pan-European Euro Stoxx 50 index finished at 4,454.75, down 25.27 points (0.56%).

Germany's economy contracted for the first time in three years due to high inflation, high interest rates, and weakening domestic and foreign demand, which was cited as a factor for the stock price decline. Germany's GDP for last year recorded -0.3%.

Robert Holzmann, known as a hawk within the ECB, also weighed on the market by mentioning the possibility of no interest rate cuts throughout this year. In response to a question about a rate cut in April, he said, "We should not talk about rate cuts," adding, "What we have seen in recent weeks points in the opposite direction. I expect no cuts at all this year."

Seokhwan Kim, a researcher at Mirae Asset Securities, analyzed, "European stock markets closed lower due to hawkish remarks from ECB officials and news of a contraction in Germany's economic growth rate in 2023. Investors showed a wait-and-see attitude due to remarks from key political and business figures at the World Economic Forum held in Davos, Switzerland, and the U.S. stock market closure."

Additionally, the absence of widely anticipated liquidity stimulus measures from the People's Bank of China among market participants also seemed to contribute to weakened investor sentiment.

The domestic market is expected to show a limited rebound today. Researcher Jiyoung Han forecasted, "Today, excessive sell-off perception-driven buying will continue, and despite a favorable foreign investor supply environment, the ECB official's dismissal of interest rate cut possibilities and increased volatility in secondary battery stocks following L&F's earnings shock will coexist as upward and downward factors during the session, resulting in a limited rebound."

In particular, the KOSPI is expected to start in a slightly weak range. Researcher Seokhwan Kim pointed out, "Since the beginning of the year, the cumulative net selling by institutions has exceeded 6.6 trillion KRW. During the same period, operating profit estimates for 2023 and 2024 were revised downward by 2.0% and 1.7%, respectively, weakening expectations for earnings improvement."

There is also a forecast that the market will move more on an individual stock basis rather than showing overall strength. Researcher Seokhwan Kim anticipated, "As expectations for additional stimulus measures from the People's Bank of China have weakened, differentiated movements based on individual stock momentum and factors are expected rather than a broad market uptrend."