[Good Morning Stock Market] Major Stock Markets See Profit-Taking... Volatility Expected to Increase in Han Stock Market

Major US Airline Flight Cancellations... Government 'Lockdown' Absent but Companies Self-Impose Restrictions
"Year-End Profit-Taking Desire Fuels Increased Volatility"

On the 23rd (local time), traders are working on the floor of the New York Stock Exchange (NYSE) in the United States.
[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] On the last trading day of last week, with the US and most European markets closed ahead of Christmas, some markets such as the UK and France that were open closed slightly lower due to profit-taking. This is attributed to companies' self-imposed lockdowns and sluggishness in commodity markets such as crude oil. The recently rising domestic stock market is also expected to see increased volatility in individual stocks due to profit-taking. The fact that US airlines have canceled a large number of flights as part of their own lockdown measures is also expected to be a burden.

On the 24th (local time), France's CAC40 index closed at 7086.58, down 0.28% from the previous day. The UK FTSE100 index also closed slightly lower at 7372.10. Markets in the US and Germany were closed for the Christmas holiday.

◆ Sangyoung Seo, Researcher at Mirae Asset Securities = On the 24th, the KOSPI surpassed the 3000 mark, following the strong performance of the US stock market. Among major overseas markets mostly closed, some that were open, such as the UK and France, closed slightly lower. This was due to profit-taking after a 1-3% rise over the past week. The previous upward trend is believed to have been driven by reduced concerns as the economic impact of the COVID-19 variant 'Omicron' was perceived to be limited.

However, with new COVID-19 cases surging in the UK and countries like Italy and Greece announcing new economic lockdowns, concerns remain, and market participants tend to maintain a cautious stance. The contraction of companies is also a burden. Several US airlines, including Delta Air Lines, canceled about 900 flights during the Christmas holiday. This appears to be due to large-scale Omicron infections and resulting staff shortages. Even though Omicron's severity is low, attention should be paid to companies and individuals strengthening their own restrictions. While a return to large-scale lockdowns like last year is unlikely, limiting economic impact, the desire for profit-taking may increase ahead of year-end.

In fact, the European market's weakness on Friday was mainly due to the decline in commodity futures markets, such as the drop in North Sea Brent crude oil following the flight cancellation news. For the time being, profit-taking and expectations for easing Omicron concerns are expected to clash. Considering this, the domestic market is also expected to start slightly lower. Program buying by financial investors may flow in ahead of ex-dividend dates, but the possibility of large shareholders offloading shares to avoid requirements cannot be ruled out. Due to these supply-demand factors, volatility in individual stocks is expected to increase.

◆ Soyeon Park, Researcher at Shin Young Securities = New COVID-19 cases in the US and Canada have surpassed levels seen during the Delta variant spread. France has surpassed 100,000 new cases for the first time. However, the number of hospitalizations and deaths has plateaued. Most infected individuals have mild symptoms, so lockdowns are unlikely to be further strengthened.

Paradoxically, this means that central banks are likely to proceed with monetary tightening as planned. From January next year, the US will accelerate tapering (asset purchase reduction). Recently, the European Central Bank (ECB), which was considered relatively accommodative, decided to end the Pandemic Emergency Purchase Programme (PEPP) in March next year. The appointment of Joachim Nagel, known as a hawk, as President of the German Bundesbank is also notable. Last week, the Bank of Korea mentioned concerns about financial system vulnerabilities and appropriate adjustments to the degree of monetary policy easing in its Financial Stability Report and next year's Monetary and Credit Policy Operation Direction Report.

Therefore, although the index may appear to be rising at first glance, the momentum of individual stocks continues to weaken. In the US Nasdaq market, the proportion of stocks trading above the 200-day moving average, a medium-term trend line, is less than 30%. The number of stocks hitting 52-week lows overwhelmingly exceeds those hitting 52-week highs. While the contribution of specific stocks is expanding and leading stocks are becoming clearer, overall market momentum is declining.

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