[Good Morning Stock Market] US Presidential Election Uncertainty... KOSPI Expected to Start Lower

[Image source=EPA Yonhap News]

On the 22nd, the KOSPI is expected to start lower due to uncertainties surrounding the U.S. presidential election and a sharp rise in market interest rates.

On the previous day at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 42,931.60, down 344.31 points (0.80%) from the previous session. The S&P 500 index recorded 5,853.98, down 10.69 points (0.18%), while the Nasdaq Composite index rose 50.45 points (0.27%) to 18,540.01.

The New York stock market showed a mixed close amid a pause ahead of major earnings announcements from big tech companies, influenced by a sharp rise in the 10-year U.S. Treasury yield and profit-taking.

Lorie Logan, President of the Federal Reserve Bank of Dallas, reiterated her previous stance supporting gradual interest rate cuts rather than aggressive reductions. She also mentioned that current financial market liquidity is sufficient and argued there is no immediate need to halt balance sheet reduction (quantitative tightening).

Additionally, the possibility of Donald Trump, the U.S. Republican presidential candidate, winning the election has increased, leading to tariff policy uncertainties and concerns over rising fiscal deficits, which pushed the U.S. 10-year Treasury yield close to the 4.2% level, limiting the upside of stock prices.

On the previous day, the domestic market rebounded despite the won-dollar exchange rate entering the 1,370 won range due to uncertainties over Trump's election, supported by additional interest rate cuts by the People’s Bank of China and foreign and institutional investors’ simultaneous net buying following perceived excessive declines last Friday.

Han Ji-young, a researcher at Kiwoom Securities, said, “Today, the market is expected to start lower, burdened by the sharp rise in the U.S. 10-year Treasury yield and dollar strength amid uncertainties over the U.S. presidential election and Dallas Fed President’s remarks supporting gradual rate cuts. However, Nvidia (4.1%) hit a new high supported by positive investment opinions from foreign firms including Bank of America (BofA), and other semiconductor stocks such as TSMC (0.6%) and AMD (1.2%) also showed strength, which is expected to provide downside rigidity to domestic semiconductor stocks.”

Researcher Han also noted, “Since August, large-scale net selling by foreigners partly reflected concerns over the semiconductor industry outlook, including Samsung Electronics, but the desire for foreign exchange gains due to the won-dollar exchange rate falling to the low to mid-1,300 won range also played a role. Currently, with the possibility of Trump’s election and the euro weakening due to the European Central Bank (ECB) rate cuts, the won-dollar exchange rate has risen to the 1,370 won range. Considering this, the incentive for foreigners to sell for foreign exchange gains is not significant.” He added, “At the same time, the stock performance of export companies such as automakers, which can benefit from exchange rate effects, is expected to remain solid.”