[Good Morning Stock Market] The World Adapting to COVID-19... US $1 Trillion Infrastructure Budget Passes Senate

Improving Mobility Index Despite Delta Variant Spread
Infrastructure Budget Passed Senate but Eco-Friendly Sector Largely Excluded

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Gong Byung-sun] Although the COVID-19 Delta variant is spreading, countries are gradually adapting to COVID-19. With the passage of the infrastructure investment plan by the Joe Biden U.S. administration, some New York stock market indices hit all-time highs.

The New York stock market showed mixed results on the 10th (local time). On that day at the New York Stock Exchange, the Dow Jones Industrial Average closed at 35,264.67, up 0.46% (162.82 points) from the previous trading day. The S&P 500 index closed at 4,436.75, up 0.10% (4.40 points) from the previous session. Both the Dow and S&P 500 indices closed at record highs. The tech-heavy Nasdaq closed at 14,788.09, down 0.49% (72.09 points) from the previous trading day.

◆ Seo Sang-young, researcher at Mirae Asset Securities = Due to the spread of the COVID-19 Delta variant, the number of new confirmed cases is increasing globally. In particular, in the U.S., cases surged from the early 10,000s at the end of June to over 230,000 as of the 9th of this month. Countries such as Israel, which has surpassed a 60% vaccination rate, and the U.K., which has exceeded a 70% first-dose vaccination rate, are seeing increases in confirmed cases, raising concerns worldwide.

Meanwhile, the U.S. Centers for Disease Control and Prevention announced that it will hold additional discussions on booster vaccinations on the 14th. Currently, Israel, the U.K., Germany, and France have announced additional vaccinations, and it is expected that the U.S. will announce a COVID-19 vaccine booster strategy through this discussion. As a result, vaccine-related stocks showed strength.

On the other hand, the Philadelphia Semiconductor Index fell 1.20%. This is presumed to be due to a market research firm, TrendForce, forecasting that DRAM prices will fall by up to 5% in the fourth quarter due to excessive inventory by PC manufacturers. TrendForce predicted that the gradual lifting of COVID-19 restrictions in the U.S. and Europe will lead to a slowdown in laptop demand, weakening demand for PC DRAM as well.

(Provided by Hi Investment & Securities)

◆ Park Sang-hyun, researcher at Hi Investment & Securities = Although economic uncertainty is increasing due to the COVID-19 Delta variant, the resurgence of COVID-19 in major countries shows a different pattern than before. Above all, in some advanced countries where at least one dose vaccination rates exceed 60% of the total population, the resurgence of COVID-19 is not as severe as feared.

Regardless of the extent of COVID-19 spread, the global economy seems to be getting accustomed or adapting to coexisting with COVID-19. As the COVID-19 situation has lasted nearly a year, economic agents are quickly adapting to living with COVID-19, which can be confirmed by various indicators. Mobility indices continue or strengthen their improving trend despite the spread of the Delta variant. The return rate of office workers in major U.S. cities and the stock price trend of Zoom indicate the normalization of remote work and video conferencing culture.

Key economic indicators such as employment, consumer sentiment, and service indices, which were hit hard by the COVID-19 pandemic, are showing improvement or maintaining their levels amid the Delta variant spread. This supports the view that advanced economies have entered an era of coexistence with COVID-19.

(Provided by Korea Investment & Securities)

◆ Kim Sung-geun, researcher at Korea Investment & Securities = On the 10th, the U.S. Senate succeeded in passing a $1.2 trillion (about 1,381.2 trillion KRW) infrastructure investment plan. Although it is a bipartisan bill supported by 69 senators, it still requires approval from the House of Representatives, and final passage is expected in September. The House went into recess at the end of July and will resume activities on September 20. This also applies to the $3.5 trillion budget reconciliation plan scheduled to be pursued immediately after the infrastructure investment.

Looking at the infrastructure investment plan passed by the Senate, the originally proposed American Jobs Plan by the Joe Biden administration saw significant reductions or exclusions in green and social infrastructure sectors. The original plan included $157 billion investment in electric vehicles and charging infrastructure, but the agreement only includes $7.5 billion for green buses and ferries and $7.5 billion for electric vehicle charging facilities, excluding investments in housing and social welfare improvements. In other words, this infrastructure plan focuses on traditional infrastructure spending.

The major fiscal momentum is expected from the budget reconciliation plan rather than this infrastructure investment plan. The goal is to pass it in September by including elements such as green energy infrastructure and social infrastructure, which were excluded due to Republican opposition, using the budget reconciliation process that the Democrats can handle alone. Therefore, the Democrats aim to pass a budget resolution first to initiate the budget reconciliation process before the August recess.

Considering that the infrastructure investment and budget reconciliation processes are underway, the market may reflect the return of fiscal momentum aligned with the House's return. However, the absence of a debt ceiling increase in this resolution is a concern. If passed without an increase, the debt ceiling cannot be raised by Democrats alone. Moreover, Republicans strongly oppose raising the debt ceiling. Unlike before, a difficult process is expected.

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