[Good Morning Stock Market] Expansion of Risk Asset Preference... Will the Domestic Stock Market Reclaim the 3000 Point Level?

US Stock Market Closes Higher
Tesla Up 4%, Lucid and Rivian Surge 23% and 15% Respectively

Domestic Market Expected to Start Higher
Possibility of Follow-up US-China Summit
US Retail Sales Recovery...Potential Upward Revision of Domestic Corporate Earnings Estimates

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] As the U.S. stock market closed higher due to an increased preference for risk assets, it is expected that the domestic stock market will also show an upward trend. Furthermore, given that U.S. retail sales indicators showed an upward trend despite inflation, a clear recovery is predicted to continue through the end of the year.

Sangyoung Seo, Researcher at Mirae Asset Securities: “U.S. Stock Market Closed Higher... Electric Vehicles to Show Strength”

The U.S. stock market started lower despite solid corporate earnings and economic indicators but closed higher as risk asset preference expanded. The Dow Jones Industrial Average rose 0.15%, while the Nasdaq and S&P 500 increased by 0.76% and 0.39%, respectively.

In particular, electric vehicle-related stocks surged. Tesla showed a rise of over 4%, despite Elon Musk exercising stock options on 2.11 million shares and selling $930 million worth of stock. This is believed to be due to large hedge funds increasing their stakes in the third quarter and Michael Burry ending his short position on Tesla. Lucid and Rivian also surged by 23% and 15%, respectively.

The results of the U.S.-China summit also deserve attention, as the market highly anticipates the possibility of tariff reductions between the two countries. Expectations for increased exports from U.S. companies to China are rising, which positively affects investment sentiment toward risk assets. If tariffs are reduced in the future, some of the high inflationary pressures could be alleviated, which is presumed to be actively considered by the Biden administration.

Despite growing inflationary pressures, active consumption within the U.S. and favorable industrial production indicators are expected to positively impact the domestic stock market. This could lead to upward revisions in corporate earnings estimates, which have been stagnant, by raising expectations for increased Korean exports. However, considering that the previous day’s strong Chinese economic indicators were partially priced in, the potential for a significant increase in the market is not expected to be large.

Sector-wise, attention should be paid to the electric vehicle segment. Additionally, since some metaverse-related stocks such as Meta Platforms declined due to profit-taking, volatility in individual stocks is also expected to be a factor to watch.

Sanghyun Park, Researcher at Hi Investment & Securities: “High Possibility of Follow-up Talks after U.S.-China Summit”

[Image source=Yonhap News]

The market is withholding judgment on the U.S.-China summit but views the possibility of follow-up talks as high. Considering the global environment, both the U.S. and China need negotiations rather than an escalation of conflicts.

The summit showed a different atmosphere compared to the high-level Alaska talks in March, with conversations that did not cross the line, providing reassurance to the market. Notably, President Biden’s statement supporting the “One China” policy regarding the highly contentious Taiwan issue played a crucial role in preventing overt conflict between the two leaders during this summit.

Regarding the high tariffs that the financial market was highly interested in, there was no significant discussion, making it difficult to draw conclusions. However, the efforts by the U.S. and Chinese leaders to avoid conflict increase the likelihood of further discussions. President Biden’s remark that “U.S.-China competition should not turn into conflict and guardrails are needed” suggests that the U.S. implicitly does not want the conflict between the two countries, including trade disputes, to escalate.

Da-eun Lee, Researcher at Daishin Securities: “U.S. Retail Sales Expected to Increase Well through Year-End Despite Inflation”

U.S. retail sales in October increased by 1.7% month-over-month, significantly exceeding expectations due to the year-end shopping season. This marks the third consecutive month of improvement in U.S. retail sales, suggesting a recovery from the resurgence of COVID-19.

Although concerns about inflation have expanded recently, and the University of Michigan Consumer Sentiment Index fell to 66.8 points, the lowest in 10 years, indicating weakened consumer sentiment, retail sales have improved. This suggests that the increase in consumption due to the shopping season was stronger than the impact of inflation.

However, the strong retail sales in October may be due to an early start to the year-end consumption season, so the absolute levels of retail sales in November and December could be weaker than in previous years. Nevertheless, as this retail sales figure demonstrates, concerns about a slowdown in household consumption despite rising inflation appear to be somewhat alleviated.

Additionally, although consumption increases related to economic reopening have not yet become visible, with the entry into the "With Corona" phase in November and December, outdoor activities are expected to increase, leading to higher demand for service consumption. As consumption related to the year-end shopping season and economic reopening gradually expands, U.S. retail sales are expected to maintain a favorable growth trend through the end of the year.

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