[Good Morning Stock Market] "Decline Expected at Start Due to Continued Tightening Concerns"... Chinese Economic Indicators Are a Variable

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] Following Federal Reserve (Fed) Chair Jerome Powell's hawkish remarks at the Jackson Hole meeting, concerns over aggressive tightening led the U.S. stock market to close lower for three consecutive trading days. On the 30th (local time), the Dow Jones Industrial Average fell 308.12 points (0.96%) to close at 31,790.87, the large-cap-focused S&P 500 index dropped 44.45 points (1.10%) to 3,986.16, and the tech-heavy Nasdaq index declined 134.53 points (1.12%) to finish at 11,883.14.

Additionally, comments from Fed officials regarding aggressive monetary policy added to the burden on the U.S. stock market. The energy sector underperformed due to a decline in international oil prices, and the semiconductor sector also fell amid the impact of interest rate hikes. The U.S. market's downward close is expected to affect the domestic market on the 31st. After a weak start, attention will focus on Chinese economic indicators and exchange rate movements, with volatility expected to continue expanding.

◆ Seo Sang-young, Head of Media Content at Mirae Asset Securities = Following Chair Powell's remarks, many Fed officials mentioned aggressive rate hike policies, which contributed to dampening investor sentiment. John Williams, President of the Federal Reserve Bank of New York, stated, "Rates need to be raised and maintained through next year, and it will take time before rate cuts begin." Thomas Barkin, President of the Richmond Fed, also said, "The future is very uncertain, and there is a lag in the effects of monetary policy."

In this context, aggressive comments from European Central Bank (ECB) officials suggest that the European region is also likely to accelerate rate hikes, adding to the pressure. The sharp drop in international oil prices was influenced by remarks related to the aggressive rate hike stance and news that negotiations on the implementation of the nuclear agreement between the U.S. and Iran may reach a conclusion. Energy stocks, including ExxonMobil, recorded weakness due to these factors.

The U.S. market's decline is expected to weigh on the domestic market on the same day. Furthermore, the U.S. Department of Labor's report showing that job openings in July increased by 200,000 to 11.2 million, among other employment indicators, raises the likelihood that the Fed will continue its aggressive rate hikes, which is expected to have a negative impact.

Moreover, concerns expressed by Citigroup and others about semiconductor companies and the possibility of an expanded downturn led the Philadelphia Semiconductor Index to fall 1.31%, which is likely to affect related stocks. However, improvements in U.S. economic indicators could raise expectations for increased exports, and hopes for expanded economic stimulus policies in China are positive factors. The domestic market is expected to start down about 0.7% and then show volatility while focusing on Chinese economic indicators and exchange rates.

◆ Han Ji-young, Researcher at Kiwoom Securities = For some time, when indicators showed strength, the market viewed it as positive, and when weak, as negative, but the market sentiment appears to have changed after the Jackson Hole meeting. Not only Chair Powell but also key Fed officials have expressed a willingness to implement aggressive tightening policies, accepting some economic slowdown based on the robustness of the labor market.

However, it is important to note that most Fed officials, including Chair Powell, share the view that meeting outcomes will depend on data received prior to each meeting. Therefore, while assuming a 75 basis point (1bp=0.01%) hike at the September Federal Open Market Committee (FOMC) meeting as a baseline, it is appropriate to maintain a strategy of reviewing employment and inflation data released before the meeting and adjusting positions accordingly.

The previous day, the domestic market closed higher due to individual positive factors such as strength in the automobile, secondary battery, and waste battery sectors despite the aftereffects of the Jackson Hole meeting. However, amid ongoing tightening concerns, the U.S. market is expected to face downward pressure, particularly from the semiconductor sector and others undergoing consecutive price adjustments. Given macroeconomic uncertainties and the Asian market situation influenced by the Chinese Purchasing Managers' Index (PMI) results during the day, it is necessary to prepare for increased volatility in foreign investors' supply and demand in the domestic market.

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