[Good Morning Stock Market] "Kospi Expected to Recover to 2700 Level Due to Nvidia Effect"

ECB Interest Rate Cut, US Stock Market Mixed
NVIDIA Returns to 3rd Largest Market Cap in One Day
"KOSPI Expected to Smoothly Recover to 2700 Level"

On the 7th, the KOSPI is expected to recover to the 2700 level, supported by the rise in the semiconductor sector centered on Nvidia in the United States.

[Image source=Reuters Yonhap News]

On the 6th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 38,886.17, up 78.84 points (0.20%) from the previous session. The S&P 500 index fell 1.07 points (0.02%) to 5,352.96, and the Nasdaq index closed down 14.79 points (0.09%) at 17,173.12.

The S&P 500 and Nasdaq indices, which hit record highs the previous day, showed mixed trends. They initially rose following the European Central Bank (ECB)'s interest rate cut news but then reversed to a decline, fluctuating throughout the session. Nvidia, which had entered the historic '3 trillion dollar market cap club' for the third time ever the previous day, surpassing even Apple, fell 1.18%, returning to the 3rd place in market capitalization within a day. Nvidia's market cap stands at $2.976 trillion, Apple at $2.982 trillion, and Microsoft leads with $3.155 trillion.

Apple also fell 0.71% that day, while only Microsoft rose 0.12%. The combined market cap weight of the top three companies in the S&P 500 is about 20%, the highest level in history. Amazon rose 2.1% on news that it plans to acquire MX Player to strengthen its business in India. Meanwhile, GameStop, which once led the 'meme stock' craze attracting individual investors through word of mouth, surged 47% as individual investor Keith Gill, known as 'Roaring Kitty,' announced a live broadcast on the 7th. Related stock AMC Entertainment also rose 12%.

Major Western countries are consecutively cutting interest rates. Following the Bank of Canada lowering its benchmark rate from 5% to 4.75% on the 5th, the ECB cut its benchmark rate from 4.5% to 4.25% on the 6th. This is the ECB's first rate cut in about five years since September 2019. The ECB stated, "We have judged it appropriate to now ease monetary tightening policies," but also said, "We will keep policy rates sufficiently restrictive for the time needed to achieve the inflation target." The ECB is monitoring a slowdown in inflation over recent quarters but is also watching for emerging wage growth trends.

The market is expecting a rate cut by the U.S. Federal Reserve. Coincidentally, signals of slowing inflation in the U.S. are also being detected. The U.S. April job openings, announced on the 5th, were 8.059 million, the lowest level in over three years since February 2021. This cooling labor market was interpreted as a sign that inflation could also slow down. This movement could support the Fed's dovish stance (preference for monetary easing) and potential rate cuts. If the May nonfarm payroll report from the Department of Labor, to be released on the 7th, confirms further employment slowdown, expectations for rate cuts are likely to increase.

Expectations that rate cuts will increase oil demand led international oil prices to rise for two consecutive trading days. On the 6th at the New York Mercantile Exchange (NYMEX), West Texas Intermediate (WTI) crude oil futures closed at $75.55 per barrel, up $1.48 (1.99%).

On the 5th, the day before Memorial Day, the KOSPI closed at 2,689.50, up 27.40 points (1.03%) from the previous trading day. Foreign investors led the rise with net purchases of 590.5 billion KRW. The rise was notable among large-cap stocks, including Samsung Electronics, which has increased expectations for supplying high-bandwidth memory (HBM) to Nvidia.

Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "The rise in the U.S. semiconductor sector centered on Nvidia is expected to increase foreign investors' risk appetite," adding, "A smooth recovery of the KOSPI to the 2700 level is anticipated." However, he noted, "The rise is expected to be limited due to the U.S. employment report issue."