[Good Morning Stock Market] US Retail Sales Below Expectations... KOSPI Expected to Start Lower

Stock Market Volatility Increases Amid Difficult Debt Negotiations
Concerns Over Slowing US Real Economy Indicators in April

[Image source=Yonhap News]

On the 17th, the Korean stock market is expected to start lower. This is due to the failure of the US debt ceiling negotiations once again, coupled with April retail sales falling short of expectations.

On the previous day (local time), the Dow Jones Industrial Average closed at 33,012.14, down 336.46 points (1.01%) from the previous session. The S&P 500, focused on large-cap stocks, ended at 4,109.90, down 26.38 points (0.64%), and the tech-heavy Nasdaq closed at 12,343.05, down 22.16 points (0.18%).

The cause of the US stock market decline was the failure of the debt ceiling negotiations. President Joe Biden held a second meeting with congressional leaders at the White House the previous day, but it ended without an agreement. Amid ongoing anxiety over the debt ceiling talks, there are expectations that some agreement might emerge in a third meeting after the weekend. The Korean stock market is also expected to experience increased volatility due to concerns over the US debt ceiling negotiations.

The US real economy indicators are also a burden. Concerns about economic slowdown are expected to continue based on April retail sales and industrial production data. US April retail sales increased by 0.4% month-over-month, marking a rebound for the second consecutive month. However, this was below the forecast (+0.7%).

Food and beverage stores saw a 0.2% decrease compared to the previous month, and department store sales dropped by 1.1%. Gasoline services fell by 0.8% despite price increases. On the other hand, online sales rose by 1.2% month-over-month.

US industrial production in April increased by 0.5% month-over-month, significantly better than the expected -0.1%. Consumer goods production rose by 0.6% compared to the previous month, slowing down from last month's (+0.8%). Manufacturing output increased by 1.0% month-over-month. This is attributed to improvements such as a 9.3% increase in automobile parts production and gains in computers and electronic products, similar to China's industrial production.

In summary, retail sales increased by only 1.6% year-over-year, and with the consumer price index at around 4.6%, concerns about economic slowdown are emerging with less intensity than expected. Although industrial production improved, excluding automobiles, the figure rose by only 0.4%. In other words, overall real economy indicators show that consumer and business sentiment is weakening amid high inflation and an economic contraction phase.

The decline in the Dow Jones and other indices following the release of April real economy data is a burden for the Korean stock market. Although the Nasdaq rose during the session, it is interpreted as a strengthening concentration on large tech stocks amid concerns about economic slowdown. Most sectors showed weakness.

Seosangyoung, head of Mirae Asset Securities, said, "Even if the debt ceiling agreement is successful, if a spending reduction plan passes, it will be only a short-term positive, and attention should be paid to the possibility of moving into a mid-term economic slowdown issue." He added, "Considering this, the KOSPI is expected to start down about 0.3% with increased volatility."

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