[Good Morning Stock Market] The Essence Amid the Ukraine Crisis is Inflation Expansion

Inflation Concerns Rise Due to Ukraine Issue
Dow Jones Down 1.38%, Tesla Plummets... Nasdaq Down 2.57%

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] On the 23rd (local time), the U.S. stock market plunged amid rising concerns over a potential armed conflict between Ukraine and Russia. The fear of war, coupled with worries that Western countries' sanctions against Russia could lead to prolonged high inflation, contributed to the sharp decline. On the same day, the KOSPI is expected to show high volatility due to the combined effects of the U.S. stock market decline and rebound buying.

Han Ji-young, Kiwoom Securities Researcher: "KOSPI will show a downward trend due to the expansion of war risk."

On the 23rd (local time), the U.S. stock market plunged as concerns over Russia's invasion of Ukraine intensified. Although the market opened higher following President Putin's statement about pursuing diplomatic negotiations despite the cancellation of a high-level U.S.-Russia meeting, the Ukrainian government's declaration of a national emergency heightened market fears. Consequently, the Dow Jones Industrial Average fell 1.38%, while the S&P 500 and Nasdaq indices dropped 1.84% and 2.57%, respectively. The Nasdaq's decline was particularly steep due to increased war fears and growth concerns, with major tech stocks such as Amazon (-3.6%), Tesla (-7%), Apple (-2.6%), and Microsoft (-2.6%) all falling.

On the same day, the domestic stock market is expected to decline influenced by the growing risk of the Ukraine war. The fact that the U.S. Nasdaq, which has played a leading role globally, has fallen about 20% from its peak and entered a technical bear market also weighs on the domestic market. However, while the U.S. market had accumulated level pressures due to a strong rally early last year, the domestic market had been relatively sluggish throughout the latter half of last year, so the burden is expected to be reflected only to a limited extent. Additionally, since the war risk has been factored in for a long time since February, further declines are expected to be limited. Considering this, it is more appropriate to take a wait-and-see or buying approach rather than selling at this point.

Seo Sang-young, Mirae Asset Securities Researcher: "Inflation concerns grow further due to the Ukraine issue."

As Western countries including the U.S. and Europe continue to announce sanctions against Russia, market participants are viewing these measures as potential inflation triggers. The suspension of the Nord Stream 2 approval process could lead to natural gas shortages and price increases, while commodity futures markets for wheat, corn, crude oil, and aluminum may also experience bullish trends.

Looking back at the 2014 Crimean Peninsula and Donbas war, which is often compared to the current situation, the economic impact was not significant. However, the difference now is that grain inventories in the U.S., Canada, and other regions are at low levels. Additionally, the crude oil market is experiencing tight supply, and global supply chain instability continues, making it impossible to rule out the possibility of prolonged high inflation.

The situation with wheat is even more serious. In 2014, the Ukraine issue began in April, avoiding the sowing period in late February and March, but now it coincides with the sowing season. While wheat prices quickly stabilized in 2014, this time the problem could be prolonged. Currently, Ukraine's wheat export volume is nearly double that of 2014, making the situation more severe. Furthermore, the sharp rise in grain prices could lead to increased food prices in Middle Eastern and Southeast Asian countries that heavily rely on imports from Ukraine, potentially triggering social unrest. In such a case, supply chain instability could be prolonged, leading to a global economic downturn.

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