[Good Morning Stock Market] US Stocks Weakened Due to Delta Variant... "Domestic Market Also Expected to Decline... But Impact Is Limited"

[Asia Economy Reporter Park Jihwan] The U.S. stock market closed lower due to concerns over economic slowdown caused by the spread of the Delta variant. Experts predict that the domestic stock market will also decline due to weakened investment sentiment among foreign investors. However, the impact is expected to be limited as some of it has already been priced in.

On the 8th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,421.93, down 259.86 points (0.75%) from the previous session. The Standard & Poor's (S&P) 500 index fell 37.31 points (0.86%) to 4,320.82, and the Nasdaq index dropped 105.28 points (0.72%) to 14,559.78. Both the Nasdaq and S&P 500 fell more than 1% from the opening. This was a result of negative investor sentiment due to the spread of the Delta variant.

◆ Seosangyoung, Researcher at Mirae Asset Securities = The KOSPI is expected to start down about 0.5 to 1.0%. The domestic stock market fell the previous day amid news that the Japanese government would declare a state of emergency in the Tokyo area and concerns over a slowdown in the Chinese economy following remarks about a reserve requirement ratio cut in China. In particular, foreign investors, who had been buying in the early session, turned to net selling in both spot and futures markets as concerns about the slowing pace of economic recovery emerged, which weighed on the market.

The large-scale net selling of futures on options expiration day also triggered selling by institutions. As a result, both the KOSPI and KOSDAQ fell about 1%. Meanwhile, the U.S. stock market’s correction due to concerns over the slowing pace of global economic recovery is expected to dampen investor sentiment. The rapid decline in the U.S. 10-year Treasury yield below 1.3% and the yen’s strengthening against the dollar, reflecting increased preference for safe-haven assets across financial markets, are additional burdens. However, considering that some of this was already priced in the previous day, a sharp expansion of the decline is unlikely. This is because it reflects a slowdown in the pace of global economic recovery rather than a high likelihood of recession.

Attention should be paid to China’s Producer Price Index, which will be released during the trading session. Concerns about the Chinese economy have increased following the Chinese government’s remarks on lowering the reserve requirement ratio. The market currently expects a slight slowdown to 8.8% year-on-year compared to last month’s 9.0%. If the figure does not fall significantly below expectations or turns out better than expected, it could ease concerns about the Chinese economy and reduce the extent of the index’s decline.

◆ Han Jiyoung, Researcher at Kiwoom Securities = The domestic stock market is expected to continue its downward trend, influenced by the sharp declines in advanced markets such as the U.S. and Europe in the previous trading session. As seen in the Didi Chuxing incident, the possibility of intensified technological disputes between the U.S. and China and concerns over loss of economic momentum in China are burdensome factors that could lead to outflows of global passive funds tracking emerging market indices, including China.

The possibility of raising social distancing to the highest level, especially in the Seoul metropolitan area, could negatively affect the investment sentiment of small and mid-cap stocks, which have a high proportion of domestic sales. However, the negative impact of the Delta variant is considered to have been reflected earlier in the stock prices compared to advanced countries, resulting in some adjustment already.

Expectations for the second-quarter earnings season remain valid, and valuations are not overly burdensome. Considering these factors, the impact of the Delta variant on the stock market today is expected to be limited.

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