[Good Morning Stock Market] "KOSPI Expected to Start Lower... Impact of US Stock Market Plunge and Trade Deficit"

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] On May 2, the domestic stock market is expected to start weak, influenced by the sharp decline in the U.S. stock market on the previous trading day and South Korea's trade deficit in April. The Federal Reserve's (Fed) Federal Open Market Committee (FOMC) regular meeting is also expected to be a variable throughout this week.

On April 29 (local time), the Dow Jones Industrial Average on the New York Stock Exchange (NYSE) closed at 32,977.21, down 939.18 points (2.77%) from the previous session. The S&P 500, centered on large-cap stocks, fell 155.57 points (3.63%) to 4,131.93, and the Nasdaq, focused on tech stocks, dropped 536.89 points (4.17%) to 12,334.64. The U.S. market was shaken after sharp declines in Apple and Amazon shares following their earnings announcements.

Jo Yeon-ju, a researcher at NH Investment & Securities, analyzed, "The three major New York indices all plunged due to poor earnings from major tech companies and inflation concerns, which expanded fears of a recession. Over 80% of companies are currently experiencing rising input costs and supply chain disruptions. Market volatility is expected to continue for the time being due to China's lockdown policies and the May FOMC."

[Image source=Yonhap News]

This week, the Fed's 'big step' (a 50 basis point rate hike at once) is virtually decided, and policy decision meetings of central banks from at least 12 countries (including the UK, Australia, Brazil, etc.) are scheduled. Attention should be paid to the market's judgment on whether aggressive rate hikes by major central banks will dampen demand and economic growth or promote them in the future.

Lee Jae-yoon, a researcher at SK Securities, said, "The earnings announcements of Amazon and Apple, which are among the top market cap stocks, are judged to have triggered concerns about supply chain disruptions and inflation. This week, not only the U.S. Fed but also many central banks including the UK are scheduled to announce monetary policies, so the market is expected to focus more on monetary policy issues than earnings issues."

[Image source=Yonhap News]

The domestic stock market is expected to show weakness on this day, due to the previously announced April export figures.

Kim Seok-hwan, senior researcher of the Digital Research Team at Mirae Asset Securities, said, "The KOSPI is expected to start down about 0.5%. Although South Korea's exports in April achieved the highest performance ever for April, a trade deficit of 2.66 billion dollars was recorded, widening the deficit compared to the previous month."

April exports increased by 12.6% year-on-year to 57.69 billion dollars, achieving the highest performance ever for April, but concerns about South Korea's exports going forward are greater. The characteristics of this export are summarized as ① a sharp decline in volume ② a shift to a decrease in exports to China ③ continuation of trade deficits for two consecutive months.

Lee Da-eun, a researcher at Daishin Securities, explained, "There is a possibility that export performance centered on unit prices will continue due to rising raw material prices," "such performance has limited impact on the real economy, and the rise in import unit prices worsens trade conditions, reducing household and purchasing power."

The Research Center of Hi Investment & Securities also pointed out, "The domestic stock market is expected to start lower due to the weakness of the global stock market over the past weekend. The significantly expanded trade deficit announced over the weekend is also a burden, and attention should be paid to foreign investor demand amid the closure of the Chinese stock market."

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