[Good Morning Market] "US Stocks Rise Despite Deutsche Bank Concerns... KOSPI Expected to Start Flat"

On the 24th (local time), the U.S. stock market initially declined due to concerns over European banks including Deutsche Bank, but rebounded as analyses suggested the worries were excessive. The Dow Jones Industrial Average closed at 32,237.53, up 132.28 points (0.41%) from the previous session. The S&P 500, focused on large-cap stocks, ended at 3,970.99, rising 22.27 points (0.56%). The tech-heavy Nasdaq closed at 11,823.96, up 36.56 points (0.31%) from the previous trading day.

Image source=Reuters·Yonhap News

Shares of Deutsche Bank fell more than 8% after news that the credit default swap (CDS) premium had surged. The CDS premium indicates the risk of a company's default. Concerns also grew over similar bonds issued by other banks after Credit Suisse (CS) and UBS merged, and the AT1 bonds (contingent convertible bonds, or CoCo bonds) issued by CS were written off.

However, the U.S. stock market rebounded as opinions emerged that these concerns were overblown. Christine Lagarde, President of the European Central Bank (ECB), emphasized that the Eurozone banking sector is resilient and stated that liquidity could be injected if necessary. Olaf Scholz, Chancellor of Germany, described Deutsche Bank as "a bank that has thoroughly reorganized and modernized its business model and is highly profitable," adding that "there is no reason to worry."

U.S. officials also explained that the Federal Reserve's decision to raise the benchmark interest rate by 0.25 percentage points at the Federal Open Market Committee (FOMC) was based on the assessment that the banking system is solid. Raphael Bostic, President of the Federal Reserve Bank of Atlanta, said regarding the rate hike decision, "It was not a simple decision," but added, "Ultimately, the committee judged there were clear signs that the banking system is sound and robust."

The domestic stock market is expected to start flat on the 27th. Sangyoung Seo, Head of Media Content at Mirae Asset Securities, explained, "Despite concerns over Deutsche Bank, the remarks by President Lagarde and others that the banking risk is stabilizing rather than expanding and the market turning upward are expected to have a positive impact on the domestic stock market."

However, credit rating agencies such as Moody's continue to mention banking risk concerns. There is also analysis that the issue of economic recession could resurface, which is a burden. Seo added, "At the last FOMC, the Fed downgraded the U.S. growth rate, suggesting the possibility of a recession this year, so the potential for index gains is not expected to be large." He also noted, "Meanwhile, there are analyses that the AI-related industry is in an overbought state, and the Philadelphia Semiconductor Index fell 1.67%, which is also a burden." He continued, "Considering this, the domestic stock market is likely to start flat and continue a stock market phase focused more on individual stocks and sectors rather than indices for the time being."

Ji-young Han, a researcher at Kiwoom Securities, forecasted that the market would remain within the influence of the banking sector crisis. She added, "Having digested the March FOMC event that produced results above neutral, we expect to enter a phase where sensitivity to economic and corporate earnings fundamental indicators increases." She further stated, "From this perspective, key upcoming indicators such as China's manufacturing PMI, U.S. University of Michigan inflation expectations, and core personal consumption expenditures (PCE) will be important. Since the Silicon Valley Bank (SVB) incident, the possibility of a no-landing scenario has greatly diminished, and the focus will shift again to the intensity of the economic slowdown."

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