Stagflation and Chinese lockdown fears
New York Stock Exchange plunges for 3 consecutive days
S&P 500 collapses above 4000 for the first time in over a year
$1 trillion in market capitalization of the 7 largest U.S. big tech companies
2550 units during the KOSPI market… Lowest all year round
Won-dollar exchange rate once exceeded 1278 won
▲ On the 10th, the KOSPI closed at 2596.56, down 14.25 points (0.55%) from the previous day. The dollar exchange rate rose 2.4 won to 1276.4 won, and the KOSDAQ closed at 856.14, down 4.70 points (0.55%). On this afternoon, in the dealing room of Hana Bank in Jung-gu, Seoul, an employee is looking at the KOSPI billboard that closed the transaction below the 2,600 mark after 17 months.
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The New York stock market, which was relieved by Federal Reserve Chairman Jerome Powell’s remarks five days ago, who dismissed the possibility of a ‘giant step’ to raise the key interest rate by 0.75 percentage points at once, continued to plunge for three consecutive days. The Standard & Poor’s 500 Index, which binds blue-chip companies, collapsed below the 4,000 line in 13 months or so, and the market capitalization of the seven largest U.S. big tech companies has evaporated by more than $1 trillion (about 1278 trillion won). The stock market is running wild amid concerns that the economy may stagnate trying to catch up on soaring prices, and supply chain uncertainties caused by the Ukraine war and China’s coronavirus lockdown.
The S&P 500 index closed at 3991.24 on the 9th (local time), down 3.20% from the previous day. It is the first time in 13 months since the 4,000 line collapsed on March 31 of last year. It was the lowest level of the year and continued the downward trend for five consecutive weeks, recording the longest decline in 11 years since June 2011. The Nasdaq Composite, a collection of technology stocks, fell 4.29%, the lowest since November 10, 2020, and the Dow also closed at its lowest level since March 9 last year.
The domestic stock market also fell below the 2,600 level, hitting its lowest point for the year. On the 10th (Korean time), the KOSPI closed at 2596.56, down 0.55% from the previous day. At one point during the day, it fell to 2553.01, a year-round low, and fell to the lowest level in about a year and a half since November 20, 2020.
In a situation where inflation is high and concerns about stagflation (S) are accumulating, it is analyzed that the fear that China’s employment deterioration and export slowdown, which is sticking to a zero-COVID-19 policy, will fuel supply chain turmoil.
Big Tech, which led the US stock market bull market last year, also failed to keep pace. Tesla stock fell 9.07%, and Amazon (-5.21%) and Microsoft (-3.69%) also plummeted all at once. CNBC reported that the market capitalization of the seven largest tech companies has disappeared by $1.59 trillion, with the value of Apple, the world’s No. 1 company in market capitalization, dropping by $220 billion (about 280 trillion won) in three trading days. The coin price also fell below $30,000 on the same day, halving from the all-time high of $69,000 (November last year).
On the other hand, the safe-haven dollar ransom is skyrocketing. The dollar index, which measures the value of the dollar against six major currencies, reached 104.2 at one point during the day, the highest since December 2002 in about 20 years. The won-dollar exchange rate rose to 1278.9 won during the day, breaking a new high for three consecutive trading days.
As the exchange rate continues to climb, the outflow of foreign funds is accelerating. Foreigners sell Korean stocks for fear of foreign exchange loss when the value of the won declines.
The New York Times interpreted the current situation, where the fluctuations in the financial market are increasing, as a harbinger of a recession. According to the media, the S&P index has fluctuated more than 2.5% every nine trading days this year, and the economic recession followed after the dot-com bubble burst in the late 1990s, the 2008 financial crisis, and the 2020 COVID-19 pandemic.
The market’s attention is focused on the US Consumer Price Index for April, which will be announced on the 11th (Korean time). A higher-than-expected inflation rate could accelerate the Fed’s rate of tightening and increase volatility in the stock market. In March, the U.S. consumer price index rose 8.5% year-on-year, the highest in about 40 years.
Reporter Odalan
Reporter Song Soo-yeon