[Good Morning Stock Market] Shock from Weak US Manufacturing Indicators... Impact on KOSPI

[Image source=Yonhap News]

Overnight, the New York stock market plunged sharply due to weak U.S. manufacturing data, leading to expectations that the domestic stock market will also show a sluggish trend on the 4th amid exchange rate pressures.

The three major indices of the U.S. New York stock market all closed lower on September 3rd (local time), the first trading day after the Labor Day holiday. On the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 1.51% from the previous trading day, the S&P 500 index dropped 2.12%, and the Nasdaq index plunged 3.26%, marking its largest decline since August 5th.

Among individual stocks, Nvidia led the semiconductor sector's sharp decline with a 9.53% drop. Intel fell 8.8%, AMD declined 7.82%, while Qualcomm and Broadcom dropped 6.88% and 6.16%, respectively.

The forecast for a September 'big cut' (0.5 percentage point interest rate cut) slightly increased. Currently, the interest rate futures market reflects a 63% probability that the U.S. Federal Reserve (Fed) will cut rates by 0.25 percentage points in September and a 37% chance of a 0.5 percentage point cut. The big cut forecast rose slightly from 35% in the morning of the same day.

This is a panic sell-off driven by concerns over a U.S. economic slowdown. Earlier, the Institute for Supply Management (ISM) released the August Manufacturing Purchasing Managers' Index (PMI), which recorded 47.2. Although this was an increase from the previous month's 46.8, it fell short of the expert forecast of 47.5.

The manufacturing PMI, a representative leading economic indicator, signifies expansion if above 50 and contraction if below 50. Thus, the ISM manufacturing PMI has remained below 50 for five consecutive months, indicating a continued contraction phase in the manufacturing sector, which accounts for 10.3% of the U.S. economy.

Additionally, the market viewed Bank of America’s (BOA) downward revision of the global economic growth forecast for this year from 3.2% to 3.1%, and China’s adjustment from 5.0% to 4.8%, as further burdens.

The domestic stock market is also expected to show a sluggish trend amid rising exchange rate pressures. On the previous day in the Seoul foreign exchange market, the closing exchange rate of the Korean won against the U.S. dollar at 3:30 p.m. was 1,341.4 won, up 3.0 won from the previous day.

The KOSPI closed at 2,664.63, down 0.61% from the previous session, influenced by net sales of 290.9 billion won and 240.2 billion won by foreigners and institutions, respectively. The KOSDAQ also closed down 1.15% at 760.37.

Kim Seok-hwan, a researcher at Mirae Asset Securities, commented on the domestic stock market, saying, "Due to worsening foreign demand and weakness in leading stocks, profit-taking is expected to surge sharply," and analyzed, "It is necessary to refrain from 'Buy the dip' strategies."