US Price Drop Sends Stocks Plummeting

It was a “Black Thursday.”

April’s higher-than-expected consumer price increase in the U.S. drove down stock markets not only in the U.S. and Europe, but also Asia. Korea was no exception.

Yesterday, Korea’s benchmark KOSPI plunged 36.32 points, or 2.59 percent, from the previous day to finish at 1,365.15. KOSDAQ, too, dropped 20.34 points, or 3.03 percent, to 650.90.

Just in five trading days since hitting the record low 1,464.70 on May 11, KOSPI plummeted once again by almost 100 points. The market capitalization decreased by 48.3104 trillion won as a result.

U.S. consumer prices rose by 0.6 percent in April in news released on May 17, beating the expectations of Wall Street analysts. This news triggered a tumble in stock prices around the world, with concerns over a possible world economic downturn as the U.S. keeps raising the interest rate and other major countries are following suit.

Yesterday, Japan’s Nikkei fell by 220.49 points, or 1.35 percent, while Taiwan’s stock index dropped by 82.80 points, or 1.16 percent. The U.S. Dow Jones Industrial Average fell 1.88 percent and NASDAQ dropped 1.50 percent. Stock prices in the U.K., Germany and France plummeted by 2.9 to 3.4 percent as well.

Due to predicted interest rate hike, the five-year U.S. Treasury yield rose by 0.03 percentage points and the ten-year treasury yield increased by 0.05 percentage points.

Meanwhile, the won-dollar exchange rate soared 10.1 won from the previous day to close at 947.0 won.

“It seems like the global stock market, which has been overheated for the worry over the U.S. inflation, is going through adjustment,” Kang Sung-mo, head investment analyst at Korea Investment and Securities said.

Im-Sook Ha Kyung-Joon Chung artemes@donga.com news91@donga.com