[Good Morning Market] US Stock Declines Narrow on Fed Official Remarks... Focus on Chinese Economic Indicators

[Image source=Yonhap News]

[Asia Economy Reporter Lee Myunghwan] On the 15th, the domestic stock market is expected to start around the flat range influenced by the mixed performance of the U.S. stock market the previous day, and during the session, it will likely be affected by the direction of the Chinese stock market. This is because China's economic indicators, including the Gross Domestic Product (GDP) growth rate, will be announced at 11 a.m. that day.

The U.S. stock market fell more than 2% the previous day due to concerns over the earnings season but reduced its losses after Federal Reserve (Fed) officials made remarks emphasizing a 0.75 percentage point rate hike in July. On the 14th (local time), the Nasdaq index, which is tech-heavy, closed at 11,251.19, up 0.03% (3.60 points) from the previous trading day. The Dow Jones Industrial Average fell 0.46% (142.62 points) to 30,630.17, and the Standard & Poor's (S&P) 500 index closed down 0.30% (11.40 points) at 3,790.38.

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The Korean stock market on the 15th is expected to start around the flat range but is forecasted to show a solid performance after the announcement of Chinese economic indicators.

Attention should be paid to China's real economy indicators such as GDP growth rate, retail sales, and industrial production, which will be announced at 11 a.m. Korean time. In particular, the GDP growth rate is expected to decrease by 1.5% compared to the previous quarter and increase by only 1% year-on-year. The Chinese government's determination to implement economic stimulus policies during the subsequent press conference will be crucial.

The fact that the U.S. stock market narrowed its losses after initially falling over 2% due to concerns about the earnings season, supported by remarks from Fed officials, is expected to have a positive impact on the Korean stock market. Although concerns remain about a 1 percentage point rate hike at the July Federal Open Market Committee (FOMC) meeting and the resulting won depreciation due to the strong dollar, the easing of these concerns during the U.S. trading session is also favorable.

Following the announcement of strong Q2 earnings and upward revision of Q3 guidance by Taiwan's TSMC during the previous session, the semiconductor sector is expected to show a solid performance. Although this news is presumed to have been partially reflected already, it is seen as an example demonstrating that the recent pessimism surrounding the semiconductor industry was excessive, which is expected to positively influence investor sentiment.

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The domestic stock market, which showed a relatively favorable trend the previous day due to expectations of a peak-out in inflation, is also expected to maintain a solid trend on the 15th, supported by the Nasdaq's rise. The announcement of strong Q2 earnings by TSMC is judged to have a positive effect on domestic semiconductor-related stocks, which had been burdened by earnings concerns.

While the shock from the U.S. producer price index for June and the consumer price index announced the previous day continues, attention is drawn to the fact that the rise in producer prices is eventually passed on to consumer prices, meaning it will take more time to reach the peak of inflation. As a result, the U.S. stock market showed a mixed trend. However, following Fed officials' remarks about the possibility of a 0.75 percentage point hike, the probability of a 1 percentage point hike by the Fed quickly dropped from the 80% range to the 40% range. Inflation concerns remain, and the upcoming European Central Bank (ECB) monetary policy meeting next week may again cause market volatility due to potential rate hikes.

During the session, the market is also expected to be influenced by China's real economy indicators for June, including retail sales, industrial production, and fixed asset investment. China's June economic indicators are expected to be weaker compared to the first quarter, reflecting the effects of lockdowns in key metropolitan areas such as Shanghai and Beijing in April and May, despite the impact of stimulus measures. If the indicators fall short of expectations, concerns may arise that China will struggle to achieve its 2022 annual growth target of 5.5%, potentially weakening overall investor sentiment in Asian markets. However, since expectations for stimulus measures are rising from June onward, it is judged that this will remain a neutral issue for the domestic stock market.

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