Stocks Surge as Weak Jobs Report Fuels Rate Cut Hopes
NEW YORK/SEOUL – August 4, 2023 – Global stock markets experienced a significant rally today following teh release of a weaker-than-expected U.S. employment report, bolstering expectations of a pause – or even cuts - in Federal Reserve interest rate hikes. The news sent shockwaves through markets, triggering gains in tech stocks and lifting Asian indices, including South Korea’s KOSPI.
The July Job Report (JOLTS) released by the U.S.Department of Labor revealed 7.181 million job openings, seasonally adjusted – the lowest level since September of last year and below the market forecast of 7.4 million. This data immediately shifted market sentiment towards a more dovish federal Reserve stance. Futures markets now indicate a 95.6% probability of a 25 basis point rate reduction by September, according to the Chicago Board Options Exchange (CBOE) volatility index (VIX), which closed down 0.82 points (4.78%) at 16.35.
Alphabet shares jumped more than 9%, marking the largest single-day increase as a 9.68% rise on April 9th. The surge followed a favorable ruling regarding Chrome, alleviating previous uncertainty. Wall Street investment firms responded by raising their price targets for the tech giant, with JP Morgan increasing theirs to $260 – a potential 23% increase from the day’s close. Despite strong performance from its AI services, Alphabet had lagged competitors due to concerns surrounding the Chrome case.
The positive momentum wasn’t limited to tech. U.S. department store chain Macy’s saw its stock surge 20% after reporting strong second-quarter earnings. However, Konoco Phillips, the third-largest oil producer in the U.S., announced plans to reduce its workforce by 20-25%.
In South Korea,the KOSPI recovered above 3,200 points,closing at 3,200.83, up 16.41 points (0.52%) for a third consecutive day of gains. though, the index’s rise was partially tempered by weakness in Chinese stocks, as the Chinese government considers reducing short selling restrictions to stabilize its market.
Notable Korean gainers included Samsung Electronics (0.43%), SK Hynix (1.14%), LG Energy Solutions (0.72%), POSCO Holdings (1.43%), and LG Chem (2.96%). Shipbuilding companies HD Hyundai Heavy Industries (0.99%) and Hanwha ocean (1.02%) also saw increases. Conversely, Hanwha Aerospace (-1.06%) and financial stocks like KB Financial (-1.54%) and Shinhan Holdings (-1.68%) experienced declines.
The KOSDAQ index also rose, finishing at 805.42,up 8.61 points (1.08%) – its sixth day of recovery and a third consecutive daily increase. Alteozen (0.86%), Ecopro (0.40%), Rainbow Robotics (1.45%), Samjin Pharmaceutical (4.38%), Hugel (2.77%), and Kolon TissueGene (7.14%) led gains on the KOSDAQ, while JP Morgan ( -0.34%), Peptron (-0.33%),Ligacem Bio (-1.45%), ABIT (-1.44%), and Celltrion Pharmaceutical (-0.38%) fell.Kim Dae-ho, Director of global Economic Research Institute, contributed to this report.
