[Good Morning Stock Market] "Continued Fear of Interest Rate Hikes and Economic Recession... KOSPI Expected to Start Lower"

Concerns Over Interest Rate Hikes and Economic Recession Persist
Weakness in Individual Stocks Also Contributes to Decline in US Stock Market

[Image source=Reuters·Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] The U.S. stock market closed lower amid ongoing concerns over interest rate hikes and economic recession. On the 19th (local time), the Dow Jones Industrial Average fell 162.92 points (0.49%) to close at 32,757.54, the S&P 500, which focuses on large-cap stocks, dropped 34.70 points (0.90%) to 3,817.66, and the tech-heavy Nasdaq Composite declined 159.38 points (1.49%) to finish at 10,543.03.

The market reflected the Federal Reserve's (Fed) expected interest rate hikes next year and recession worries. Attention is focused on the November Personal Consumption Expenditures (PCE) price index to be released this week. The decline in individual stocks also acted as a negative factor. Meta, the parent company of Facebook, which received a preliminary antitrust violation opinion from the European Union (EU), fell more than 4%, and Disney dropped nearly 5% as the box office performance of the movie "Avatar: The Way of Water" fell short of expectations.

The U.S. stock market's decline is expected to have a negative impact domestically on the 20th. The ongoing recession issue is also a burden. The domestic stock market is expected to start lower on the day.

◆ Seo Sang-young, Head of Media Content Division at Mirae Asset Securities = The decline in the U.S. stock market is presumed to be due to recession concerns and weakened investor sentiment, compounded by issues with individual stocks. The EU announced the results of an investigation stating that Meta violated antitrust regulations. The preliminary investigation found that Meta gained an advantage over competitors by linking Facebook to the online classified advertising service Facebook Marketplace. It was also alleged that unfair trade practices were conducted against competitors advertising on Facebook and Instagram. If confirmed, Meta would have to pay fines amounting to about 10% of its global revenue. Following this announcement, antitrust-related issues centered on large tech stocks surfaced, leading to sell-offs.

Amazon fell 3.35% after claims that its earnings growth would slow next year. It is expected to be a negative factor as consumers are cautious about spending amid economic slowdown. Additionally, the growth of its cloud computing business is also reported to be slowing. Since these factors have been causes of previous declines, the likelihood of these issues continuing is low, and attention should be paid to the potential for a rebound in sentiment.

Meanwhile, the Nasdaq's weakness is expected to act as a factor dampening domestic market investor sentiment. The recession issue could also increase uncertainty. However, since the Nasdaq's decline was influenced by negative news centered on individual stocks, its impact is expected to be limited. The ongoing weak dollar trend, improvement in European economic indicators, and China's expression of willingness to stimulate the economy are factors that could improve investor sentiment. The domestic market is expected to start about 0.3% lower and continue with a stock-specific market.

◆ Kim Ji-hyun, Researcher at Kiwoom Securities = Expectations for a Santa rally are fading as tightening policies by central banks worldwide and recession concerns spread. Although the Chinese government has expressed its intention to stimulate the economy next year, controversies over inaccurate COVID-19 death statistics and restrictions on unnecessary outings or public transportation in some regions mean uncertainty about the recovery of mobility still exists.

Today, the domestic stock market is expected to face downward pressure due to the impact of U.S. interest rate hikes and weak U.S. housing data. Reports that Japan is considering revising its decade-long monetary easing policy after April next year highlight the need to watch the direction of the exchange rate.

Additionally, among sectors such as retail, content, and airlines that rallied recently on expectations of China's reopening, attention should be paid to stocks showing differentiated price movements. Since disappointment selling emerged due to the box office performance of "Avatar: The Way of Water" falling short of expectations during its opening weekend, volatility in related stocks should also be monitored.

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