[Good Morning Stock Market] US and Europe Recession Reemerges... "KOSPI Expected to Start Lower"

[Image source=Yonhap News]

On the 26th, the Korean stock market is expected to start lower. This is due to renewed concerns about an economic recession following weak U.S. manufacturing and service sector indicators. The U.S. stock market also closed lower.

On the 23rd (local time), the Dow Jones Industrial Average closed at 33,727.43, down 219.28 points (0.65%) from the previous session. The large-cap focused Standard & Poor's (S&P) 500 index fell 33.56 points (0.77%) to 4,348.33, and the tech-heavy Nasdaq index dropped 138.09 points (1.01%) to 13,492.52.

The U.S. composite PMI (Purchasing Managers' Index) for June slowed from 54.3 to 53.0. The manufacturing PMI was preliminarily recorded at 46.3, marking the lowest level in six months, indicating a contraction phase in the manufacturing sector. The preliminary service sector PMI for the same month was 54.1, down from 54.9 last month, but slightly above market expectations of 53.8.

The Eurozone's composite PMI for June also fell to 50.3 from 52.8 last month, marking the lowest level since January. The manufacturing PMI declined to 43.6 from 44.8 last month. The service sector PMI dropped to 52.4 from 55.1 the previous month. New orders decreased for the first time in five months, and the employment growth rate contracted to the lowest level in four months.

Seo Sang-young, head of the Media Content Division at Mirae Asset Securities, explained, "These indicator results increased the preference for safe-haven assets, strengthening the U.S. dollar, and acted as major factors for rising government bond prices (falling bond yields) and gold prices. The stock market declined as profit-taking selling emerged mainly in stocks that had seen significant gains since the beginning of the year."

Weak indicators from the U.S. and Europe pose a burden on the Korean stock market. Especially if the global economic slowdown impacts the market, the effect on the Korean stock market, which is highly dependent on exports, will be significant.

Additionally, the larger declines in indices related to the Korean stock market, such as the Philadelphia Semiconductor Index, Russell 2000 Index, and Dow Transportation Index, are also negative factors.

The significant declines in sectors that had led the stock market rally, such as electric vehicle & autonomous driving ETFs, global secondary battery ETFs, and robot & AI ETFs, due to profit-taking selling, are also expected to affect the domestic stock market.

Seo said, "Considering this, the Korean stock market is expected to start down about 0.5%, followed by a process of digesting profit-taking selling mainly in stocks that had seen large gains."

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