The South Korean stock market on Wednesday wrote a finish to the six-day winning streak that saw it collect more than 100 points or 8.5 percent en route to a six-month closing high. The KOSPI fell sharply through support at 1,300 points, but investors are hopeful that the market can make back some of those losses on Thursday.
The global forecast for the Asian markets is fairly positive after suffering a modest downside correction in the previous session. Mixed economic and corporate data out of the United States is expected to keep the markets from straying too far from the unchanged line in either direction. The markets in Europe, Canada and the United States all finished with modest gains, and the European markets are projected to follow that path.
The KOSPI finished sharply lower on Wednesday, as investors locked in gains in the financial, automobile and technology shares.
For the day, the index dropped 38.03 points or 2.93 percent to close at 1,262.07 after trading between 1,260.73 and 1,287.59. Volume was 742.6 million shares worth 6.59 trillion won, with decliners outnumbering gainers 507 to 316.
Among the decliners, Woori Finance shed 5.76 percent, while Hynix Semiconductor lost 2.10 percent, LG Electronics fell 1.96 percent, LG Display declined 3.63 percent, Hyundai Heavy Industries slumped 6.56 percent, Daewoo Shipping lost 5.21 percent, Samsung Heavy Industries lost 2.54 percent, Hyundai Motor declined 3.99 percent, Kia Motor fell 4.89 percent, S-Oil shed 2.50 percent, SK Holdings fell 2.56 percent, KB Financial Group fell 4.59 percent, Shinhan Financial Group lost 4.50 percent, Samsung Electronics declined 4.62 percent and POSCO fell 4.5 percent.
Bucking the trend, Ssangyong Motor surged 14.85 percent.
The lead from Wall Street is cautiously optimistic as stocks ultimately closed higher after enduring choppy trading for much of Wednesday's session. The uncertainty seen for most of the day came as investors responded to a mix of positive and negative news from both the economic and corporate fronts.
In economic news, wholesale inventories fell by much more than economists had been expecting in the month of February, according to a report released by the Commerce Department, although the report also showed an increase in wholesale sales. The report showed that wholesale inventories fell 1.5 percent in February following a revised decrease of 0.9 percent in January. Economists had expected inventories to fall by 0.6 percent compared to the 0.7 percent decrease originally reported for the previous month.
At the same time, the Commerce Department said that wholesale sales edged up 0.6 percent in February following a 2.4 percent decrease in January. The increase in sales came on the heels of seven consecutive monthly decreases.
Separately, the Mortgage Bankers Association revealed that its index of mortgage application volume rose 4.7 percent on a seasonally adjusted basis for the week of April 3rd following a 3 percent increase in the previous week.
Later, stocks saw some weakness on the heels of the minutes of the March Federal Open Market Committee meeting, which said that committee members remain concerned about downside risks to an already weak outlook for economic activity. The minutes showed that nearly all of the meeting participants felt that economic conditions had deteriorated relative to their expectations at the time of the January meeting.
On the corporate front, Pulte Homes (PHM) has agreed to acquire rival Centex Corp. (CTX) in a stock-for-stock deal. The deal is valued at $1.3 billion and will create the nation's largest homebuilding company. Under the terms of the agreement, Centex shareholders will receive 0.975 shares of Pulte common stock for each share of Centex they own. Based on Pulte's closing price on Tuesday, the deal values Centex at $10.50 per share, a 38 percent premium to Centex's closing price.
Meanwhile, Dow component Alcoa (AA) reported a $497 million net loss for the first quarter, hurt by the impact of the economic downturn on its core industrial and commercial markets as well as an historic decline in aluminum prices.
The major averages all ended the day in positive territory, although off their best levels of the day. The Dow closed up 47.55 points or 0.6 percent at 7,837.11, the NASDAQ closed up 29.05 points or 1.9 percent at 1,590.66 and the S&P 500 closed up 9.61 points or 1.2 percent at 825.16.
In economic news, South Korea's central bank will on Thursday announce its decision on interest rates. Analysts are expecting the central bank to hold rates at 2 percent. Last month, the central bank pared interest rates by 25 basis points, from 2.25 percent to a record low 2.00 percent, marking the central bank's seventh rate cut in the last five months. South Korea also will provide producer price numbers for March, with forecasts calling for an increase of 4 percent on year following the 4.4 percent annual gain in February.
Also, South Korea's L money supply, representing the country's the broadest measure of money supply, grew 10.8 percent year-on-year in February, at a slower pace compared to a 10.9 percent rise in January, the Bank of Korea said Monday. Meanwhile, the M2 money supply increased 11.4 percent annually in February compared to a 12 percent growth in the previous month.
Finally, the Ministry of Knowledge Economy and the Korea Plant Industries Association revealed that industrial plant orders plunged 61.3 percent year-on-year during the first quarter of 2009 to US$ 4.9 billion from US$11.2 billion reported last year, as businesses and government tightened spending amid the global economic crisis.
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