[Good Morning Stock Market] "US Stocks Weighed Down by Middle East Unrest... KOSPI Expected to Start Lower"

The U.S. stock market declined. The retreat in expectations for interest rate cuts, due to a combination of escalating Middle East tensions and better-than-expected economic indicators, influenced the market. As a result, the Korean stock market is also expected to start lower.

[Image source=Getty Images Yonhap News]

On the 15th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average, centered on blue-chip stocks, closed at 37,735.11, down 248.13 points (0.65%) from the previous trading day. The S&P 500, focused on large-cap stocks, fell 61.59 points (1.2%) to 5,061.82, and the Nasdaq, centered on tech stocks, dropped 290.08 points (1.79%) to close at 15,885.02.

The U.S. stock market was influenced by solid economic data alongside ongoing risks stemming from the Middle East. According to the U.S. Department of Commerce, retail sales increased by 0.7% last month compared to the previous month, surpassing market expectations of 0.4%. Among the 13 retail sales categories, 8 showed growth. This raised concerns that the U.S. Federal Reserve (Fed) might become more cautious about cutting interest rates.

Additionally, the escalation of the Middle East crisis also had an impact. On the 14th, Iran attacked Israel in retaliation for the bombing of its consulate in Syria. Although Israel did not immediately launch a full-scale war, reports that it would carry out painful retaliation increased market anxiety.

Han Ji-young, a researcher at Kiwoom Securities, explained, "Geopolitical instability has intensified following Iran's attack on Israel, and since the key to further escalation lies with Israel, the market has been closely watching their actions. News of Israel's imminent attack on Iran the previous day ignited the possibility of further escalation, triggering a sharp decline in the U.S. stock market late in the trading session." She added, "The stock market is currently surrounded by geopolitical uncertainty, but it is important to note that it is unlikely to escalate to the level of past Middle East war crises."

The Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) fell 0.6%, and the MSCI Emerging Markets Index ETF also dropped 0.6%. Eurex KOSPI 200 futures declined by 1.1%. Considering this, the KOSPI is expected to start the day down by approximately 0.8% to 1.2%.

Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "The U.S. March retail sales surprise triggered the 'Good News is Bad' mechanism, increasing adjustment pressure on risk assets. The domestic stock market is also expected to continue feeling this impact."

Researcher Han Ji-young stated, "Due to the U.S. retail sales surprise causing U.S. interest rates to rise and the negative news flow from the Middle East late in the U.S. trading session the previous day, a lower start is expected. However, noting the low likelihood of intensified conflict between the two countries, the market is expected to show a trend of narrowing losses during the trading session."