[Good Morning Stock Market] Easing Concerns Over US Economic Slowdown... Expectation to Recover Above 2600 Points

[Image source=Yonhap News]

Concerns about an economic slowdown triggered by the US labor market have eased, leading to expectations that the domestic stock market will rebound above the 2600 level on the 9th. The KOSPI closed at 2556.73 the previous day.

All three major indices on the US New York Stock Exchange rose on the 8th (local time). Last week’s new unemployment claims dropped by the largest margin in a year, partially alleviating fears of a cooling labor market that had been a cause for recent recession expectations. The Japanese yen also weakened against the dollar, calming concerns about the unwinding of the "yen carry trade."

On that day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed at 39,446.49, up 683.04 points (1.76%) from the previous trading day. The large-cap-focused S&P 500 index rose 119.81 points (2.3%) to close at 5,319.31, marking the largest daily gain since November 2022. The tech-heavy Nasdaq index jumped 464.21 points (2.87%) to finish at 16,660.02.

The significant decrease in new unemployment claims last week stimulated investor sentiment. According to the US Department of Labor, new unemployment claims for the week of July 28 to August 3 totaled 233,000, below both the expert forecast of 241,000 and the revised figure of 250,000 for the previous week. Notably, this was a decrease of 17,000 claims compared to the prior week, the largest drop in a year. The labor market cooling concerns that had rapidly spread after the July employment report released on the 2nd were partially eased following the unemployment claims announcement.

With concerns about an economic slowdown temporarily subdued, government bond yields are on the rise. The US 10-year Treasury yield, a global benchmark for bond yields, rose 2 basis points (1bp = 0.01 percentage points) from the previous day to 3.98%, while the 2-year Treasury yield, sensitive to monetary policy, increased 3 basis points to 4.03%.

The domestic stock market, which had recently shown a slight downward trend, is also expected to attempt a rebound. The KOSPI closed at 2556.73, down 0.45% from the previous trading day, unable to withstand the sell-off by foreigners and institutions the day before. The KOSDAQ also ended trading down 0.44% at 745.28.

Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "(The domestic stock market) is expected to see a strong rebound centered on semiconductors and healthcare," adding, "Since last Monday’s gap down below the 200-day moving average, the market has been in a sideways trend without a clear rebound."

He further stated, "Considering the improvement in investor sentiment due to easing concerns about the US economic slowdown, expectations for foreign capital inflow, and the resistance of the dollar-won exchange rate at 1380 won, a rebound toward the 200-day moving average around 2625 points during the trading session can be anticipated."