[Good Morning Stock Market] Concerns Over Delayed Economic Recovery in Second Half... Plunging US Stock Market Also Weighs on Domestic Market

COVID-19 Resurgence Highlights
New York Stock Market Closes Down Over 2%
"Future Focus Will Align with Economic Recovery Speed"

[Asia Economy Reporter Oh Ju-yeon] Concerns over the resurgence of the novel coronavirus infection (COVID-19) are once again weighing on domestic and international stock markets. On the 24th (local time), the U.S. Dow Jones Industrial Average closed sharply down 2.72% at 25,445.94 compared to the previous trading day, the S&P 500 index fell 2.59% to 3,050.33, and the Nasdaq index dropped 2.19% to 9,909.17. European stock markets also closed lower, leading to analyses that this could affect the domestic stock market, which had closed up more than 1% the day before.

On the 17th, the KOSPI index opened at 2,133.18, down 4.87 points (0.23%) from the previous trading day, fluctuating around the flat line as dealers worked in the Hana Bank dealing room in Euljiro, Seoul. Photo by Moon Honam munonam@

◆ Sangyoung Seo, Kiwoom Securities Researcher = The rapid increase in COVID-19 cases in the U.S. is raising concerns about economic recovery in the second half of the year. In particular, the International Monetary Fund (IMF) has also lowered growth forecasts for countries worldwide compared to April, citing these uncertainties, which is expected to negatively impact the Korean stock market. Additionally, announcements such as the New York governor imposing a 14-day quarantine on travelers from certain U.S. states where COVID-19 is spreading, and Europe continuing to ban entry of travelers from the U.S., are also burdensome. The concern over a sharp drop in international oil prices due to weak energy demand could also affect the Korean stock market.

Furthermore, following recent concerns about uncertainties in U.S.-China trade negotiations, news that the U.S. will impose tariffs on European Union (EU) products raises the possibility of intensified trade disputes between the U.S. and the EU.

Recently, the World Trade Organization (WTO) showed that global trade volumes are declining, and if such protectionism expands further, it will burden Korean exports. This could ultimately weigh on the performance of Korean companies, providing a pretext for market corrections.

However, considering that as the possibility of COVID-19 resurgence increases, U.S. stocks related to untact (contactless) sectors and COVID-19 vaccines and treatments showed limited correction or remained resilient, attention is expected to focus on related stocks in the Korean stock market on the 25th as well.

◆ Yeonju Jo, NH Investment & Securities Researcher = The three major New York indices all fell more than 2% yesterday due to concerns over a second wave of COVID-19 as daily new cases in the U.S. exceeded 30,000. Additionally, the IMF lowered its 2020 economic growth forecast from -3.0% to -4.9%, announcing that economic recovery from the pandemic will be more gradual than previously expected for the U.S. (-5.9% → -8.0%), the Eurozone (-7.5% → -10.2%), and Korea (-1.2% → -3.0%).

Until now, the U.S. stock market had rebounded mainly in cyclical stocks following expectations that the economy had passed its bottom, especially after the reopening of economic activities in May. With the fiscal policy effects ending in July and the Federal Reserve’s asset purchases gradually decreasing, expectations for policy momentum have diminished. The possibility of shutdown orders in the southwestern region has increased economic uncertainty.

Since expectations of having passed the economic bottom are somewhat reflected in the market, the focus is likely to shift to the speed of economic recovery going forward. Disappointment over slower-than-expected recovery could stimulate profit-taking. It is judged that the market will react sensitively to the number of COVID-19 infections in the U.S. over the next two weeks.

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