[Good Morning Market] US Recession vs. China Economic Stimulus

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Junho] On the 8th (local time), the U.S. stock market closed lower (Dow -0.81%, Nasdaq -0.73%, S&P 500 -1.08%, Russell 2000 -1.49%) amid concerns that an economic recession could impact corporate earnings. The direction of South Korea's stock market is expected to be determined after confirming whether China's economy is improving through the export-import data to be released on the 9th, amid growing worries about a recession.

On the previous day in the U.S. stock market, the Philadelphia Semiconductor Index fell by 2.39%. Investor sentiment shrank after Intel's CEO mentioned that chip demand would decrease due to the global economic slowdown. With concerns about a recession dominating the U.S. stock market, the index dropped significantly as this was interpreted as a signal that the economic slowdown is also affecting profit securing. Notably, bond demand stood out in the Treasury auction, and crude oil closed at $122.15 per barrel, up 2.3% from the previous day, pushing the U.S. 10-year Treasury yield back above 3%. The 10-year Treasury yield, which started the day at 2.983%, rose to 3.022%.

This signal is expected to have a negative impact on the domestic stock market as well. Seo Sang-young, Head of Media Content at Mirae Asset Securities, analyzed, "The decline in the Philadelphia Semiconductor Index increases the possibility of weakness in related Korean stocks." On the previous day, Samsung Electronics fell by 0.31%, while SK Hynix rose by 1.92%.

Amid various negative factors, the turning point for the stock market on this day is likely to be whether the Chinese export-import data shows improvement. The day before, the Deputy Minister of Commerce of China evaluated that the stabilization of China's foreign trade is facing significant pressure due to uncertainties and domestic and international variables ahead of the export-import statistics announcement. He also pointed out that China's export-import is under pressure from transportation issues and soaring raw material prices amid slowing trade growth. This statement was interpreted as meaning that the export-import data trend is worse than expected, exerting downward pressure not only on the Chinese stock market but also on the South Korean stock market. In April, China's exports increased by 3.9% year-on-year, falling more than 10 percentage points from March's 14.7%. The market expects May exports to recover somewhat, increasing by 8.0% month-on-month. Imports are forecasted to rise by 2% compared to the previous year, after being flat.

Researcher Seo said, "Even if the Chinese trade balance announced, which the Chinese government expressed concerns about the day before, falls short of expectations, the market impact is expected to be limited as it was already priced in the previous day. Rather, if the results are better than expected, it is expected to have a positive effect on overall investor sentiment."

Han Ji-young, a researcher at Kiwoom Securities, stated, "Since today is the simultaneous expiration day for futures and options, it is necessary to keep open the possibility of increased market volatility due to rapid changes in foreign and institutional investors' spot and futures supply and demand during the late trading session and simultaneous quotes." He added, "Considering that major external events such as China's export-import data, the ECB monetary policy meeting, and the U.S. consumer price index the following day are also pending, it is expected to be a day of cautious observation. However, a differentiated market is expected among sectors, centered on Chinese infrastructure investment and regulatory easing-related stocks (materials, games, etc.)."

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