[Good Morning Stock Market] "Weakness in US Stock Market is a Burden"... Eyes on Export and Import Indicators

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] The U.S. stock market fell for the fourth consecutive trading day amid ongoing concerns over Federal Reserve (Fed) tightening. On the 31st of last month (local time), the Dow Jones Industrial Average closed at 31,510.43, down 280.44 points (0.88%) from the previous session. The S&P 500, focused on large-cap stocks, ended the day at 3,955.00, down 31.16 points (0.78%). The tech-heavy Nasdaq index recorded 11,816.20, falling 66.93 points (0.56%).

After economic indicators showed a slowdown in the labor market, the U.S. stock market initially rose during the session. However, the possibility of a 75 basis point (bp) increase in the European Central Bank's (ECB) benchmark interest rate led to a reversal and subsequent widening of losses. This is expected to weigh on the domestic stock market on the 1st as well.

◆ Seo Sang-young, Head of Media Content Division at Mirae Asset Securities = The U.S. stock market initially rose after the ADP National Employment Report revealed that private sector employment in the U.S. increased by only 132,000 in August, significantly below market expectations. When employment shows weakness, there is attention on the possibility of inflation stabilizing downward, which can expand risk asset preference sentiment; however, if employment appears robust, volatility is expected to increase.

However, the Philadelphia Semiconductor Index led the decline with a 1.15% drop. This is presumed to be the result of some companies lowering their guidance due to concerns about future demand slowdown amid earnings announcements. Additionally, some apparel sectors lowered their guidance due to global economic slowdown and supply chain instability issues, further fueling recession concerns.

Moreover, the preliminary consumer price index (CPI) for the Eurozone in August showed an increase in the 9% range, raising the likelihood of a 75bp rate hike at the ECB monetary policy meeting. Due to drought and a sharp rise in natural gas prices, factory operating rates are expected to slow, and the possibility of aggressive ECB rate hikes is anticipated to exacerbate Eurozone recession concerns.

The U.S. stock market's reversal and widening losses pose a burden on the domestic stock market. Furthermore, the continued decline in the Philadelphia Semiconductor Index may negatively impact investor sentiment toward semiconductor-related stocks, which had rebounded in the previous trading session.

However, attention should be paid to the export-import statistics for August to be released on the day. The market expects exports to increase by 5.5%, a slowdown from the previously announced 9.2% year-on-year growth last month. Considering inventory accumulation, there is a high possibility that the actual figure will exceed expectations, which could positively influence investor sentiment. Nevertheless, the continued rise in imports may widen the trade deficit, acting as a factor for won depreciation, which is a concern. Taking this into account, the domestic stock market is expected to start with a decline of around 0.5% and then undergo a volume digestion process.

◆ Han Ji-young, Researcher at Kiwoom Securities = The U.S. stock market has shown weakness for four consecutive trading days, with aftershocks continuing since the Jackson Hole meeting. The labor market weakness may prompt the Fed to consider slowing the pace of rate hikes. Nonetheless, since the Fed prioritizes inflation control even at the cost of economic slowdown, unless real economy indicators such as employment and consumption significantly deteriorate, the strong rate hike stance is unlikely to change.

It is important to note that the ECB is considering a 75bp rate hike rather than a 50bp increase at its monetary policy meeting. Given that euro weakness is triggering global dollar strength, which in turn is causing earnings concerns for U.S. large tech stocks with high overseas sales ratios and raising fears of capital outflows from emerging markets, the overall stock market direction is expected to vary depending on the euro's movement after the ECB meeting.

The domestic stock market is expected to show a weak trend due to external pressures such as European inflation concerns and the decline in the U.S. stock market, as well as some retracement following the mechanical rise of the previous day.

During the session, the results of South Korea's August export trade balance are expected to influence the stock prices of domestic export sectors and the won-dollar exchange rate. Since market expectations for export-import indicators are low, if the figures are better than expected, it is anticipated to support the downside of the domestic stock market.

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