[Good Morning Stock Market] Expecting 'Upward Trend' if Exchange Rate Stabilizes... Limited Fluctuations Anticipated

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] On the 7th, the Korean stock market is expected to show limited fluctuations.

On the previous day, the Korean stock market started higher, supported by the strong performance of the U.S. stock market, but concerns over the U.S.-China trade dispute continued, limiting the gains. The combination of the Evergrande Group lawsuit, Taiwan's Defense Minister's tough remarks on China, political uncertainty in Japan, and New Zealand's interest rate hike news led to a sharp increase in sell-offs.

Seosangyoung, a researcher at Mirae Asset Securities, said, "Despite the contraction of economic momentum in the U.S. stock market, recent rebound buying following the decline, easing of U.S. political uncertainty, and expectations for a U.S.-China summit are expected to have a positive impact." He added, "Considering this, the domestic stock market on the 7th is expected to start with a rise of around 0.5% and then show limited fluctuations. If the won-dollar exchange rate, which surpassed 1190 won, stabilizes, the gains could expand, so attention should be paid to related trends."

On the 6th (local time), the New York stock market started lower as long-term interest rates rose, leading to selling in growth stocks such as tech shares, but buying interest flowed in as concerns over debt ceiling increase negotiations eased, resulting in a positive close. On the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 34,416.99, up 102.32 points or 0.30% from the previous day. The Standard & Poor's (S&P) 500 index ended at 4,363.55, up 17.83 points or 0.41%. The tech-heavy Nasdaq Composite also closed at 14,501.91, up 68.08 points or 0.47% from the previous day.

News that the opposition Republican Party proposed a temporary suspension of the federal government's debt ceiling improved investor sentiment amid expectations of an agreement. Senate Majority Leader Mitch McConnell of the Republican Party proposed extending the debt ceiling until December to avoid default. This means allowing debt expansion within the range that can cover spending until then.

With buying across various stocks, the market rapidly narrowed losses around 1 p.m. and turned positive. The drop in crude oil futures prices due to short-term profit-taking also encouraged buying. The long-term interest rate, which rose to 1.57%, the highest since June, also paused, attracting buying in major tech growth stocks.

Researcher Seo said, "Rebound buying that has continued since the previous day reduced losses across most stock groups, and the market turned positive after McConnell mentioned the debt ceiling issue in the afternoon." He also noted, "News of a principle agreement for a U.S.-China summit within the year also acted as a positive factor."

Han Ji-young, a researcher at Kiwoom Securities, said, "The domestic stock market, which had sharply fallen to threaten the year's low in the previous trading day, is expected to rebound supported by external positive factors such as easing uncertainty over the U.S. debt ceiling and inflation pressure." She emphasized, "In particular, concerns over the resumption of U.S.-China trade conflicts had recently been a source of market anxiety, but the news of a virtual summit between Biden and Xi Jinping within the year is expected to alleviate this."

However, she cautioned that due to the sharp decline in a short period on the previous trading day, attention should be paid to increased price volatility caused by credit forced sales in the early session. She also advised preparing for the possibility of temporary selling pressure from investors looking to reduce positions to cut losses during the rebound phase.

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