[Good Morning Stock Market] Oil Market Collapse Shock... Global Stock Markets Fall Simultaneously

[Image source=Yonhap News]

[Asia Economy Reporter Ji-hwan Park] The global stock markets collectively declined due to the first appearance of negative oil prices. On the 21st (local time) at the New York Stock Exchange, the Dow Jones Industrial Average closed at 23,018.88, down 631.56 points (2.67%) from the previous day. The S&P 500 index also plunged 86.60 points (3.07%) to 2,736.56, and the Nasdaq Composite index ended trading at 8,263.23, down 297.50 points (3.48%).

European stock markets also plunged by around 3% due to the oil price collapse. Germany's DAX index closed at 12,498.5, down 426.05 points (3.99%) from the previous day. France's CDC index ended at 4,537.46, down 170.84 points (3.77%). The UK's FTSE 100 index recorded 5,641.03, down 171.80 points (2.96%).

In the domestic stock market, the oil market collapse issue had already been reflected the previous day, so a large-scale adjustment is not expected, but it is analyzed that investment sentiment may remain weak for some time.

◆ Sangyoung Seo, Kiwoom Securities Researcher = The impact on the US stock market today was partly due to the decline in investment sentiment caused by the sharp drop in international oil prices, but IBM's (-3.03%) earnings announcement also played a significant role. IBM announced that its first-quarter sales declined 3.4% year-on-year, falling short of expectations due to a contraction in software sales. In particular, although the cloud-related segment increased, it mentioned that contract delays and suspensions occurred mainly among retail companies after March.

The issues related to the collapse of the oil market in the US stock market and IBM's poor earnings announcement had already been reflected in the Korean stock market the previous day, but the continued concern over investment sentiment deterioration is negative. Especially, the WTI June futures plunged more than 40%, and Brent crude also fell more than 25%, dropping below $20, indicating that the oil market collapse is ongoing, which is a burden. Additionally, the Philadelphia Semiconductor Index plunged 4.73%, with tech stocks leading the decline in the US stock market, making a correction in the Korean stock market inevitable.

On this day, the Morgan Stanley Capital International (MSCI) Korea Index Exchange-Traded Fund (ETF) fell 2.92%, and the MSCI Emerging Markets Index ETF dropped 2.77%. The New York offshore non-deliverable forward (NDF) 1-month USD/KRW exchange rate was 2,131.24 won, reflecting which the USD/KRW exchange rate is expected to start with a 1 won increase.

◆ Byunggyu Min, Yuanta Securities Researcher = Oil-producing countries are once again resolving to coordinate policies. Despite the recent expansion in oil price volatility, a positive aspect is that the credit risk of US energy companies continues to decrease. Although concerns have arisen about the fixation of single-digit oil prices after the plunge the previous day, such abnormal trading did not occur in Brent crude, which can be cash-settled. Considering that industrial metals, which only reflect demand-side negative factors (COVID-19), are defending prices at around -15.4% compared to the beginning of the year (based on LMEX), it seems reasonable to view the sharp oil price drop on the 20th as a temporary supply-demand imbalance before maturity.

The ongoing sharp decline in oil prices, despite the production cut resolution by OPEC+ (a coalition of OPEC and 10 major oil-producing countries), is a variable that will trigger immediate policy changes by oil-producing countries. Currently, OPEC+ is reviewing plans to implement production cuts immediately, and US President Trump has once again proposed a plan to purchase 75 million barrels of strategic reserves.

This content was produced with the assistance of AI translation services.