[Asia Economy Reporter Oh Ju-yeon] On the 16th (local time), the U.S. stock market showed mixed results despite news that a $900 billion economic stimulus package to respond to COVID-19 was likely to be finalized. The Dow Jones Industrial Average fell 0.15% compared to the previous trading day, while the S&P 500 and Nasdaq indices closed up 0.18% and 0.5%, respectively. Additionally, the U.S. central bank, the Federal Reserve (Fed), announced after the Federal Open Market Committee (FOMC) regular meeting that it would keep the benchmark interest rate unchanged at 0.00?0.25%. The Fed also raised its economic growth forecast for this year (GDP) from -3.7% in September to -2.4%. Growth rates for 2021 and 2022 were also raised by 0.2 percentage points each to 4.2% and 3.2%, respectively. Attention is focused on how these factors might affect the investment sentiment of domestic stock market participants.
◆ Seo Sang-young, Kiwoom Securities Researcher = The U.S. stock market showed weakness due to poor economic indicators but turned upward as the possibility of an additional stimulus package agreement increased. However, investor sentiment was dampened as most stocks underperformed, with only a few individual stocks showing strength.
Economic indicators, additional stimulus, and the FOMC caused changes. Poor economic indicators due to the spread of COVID-19 increased the possibility of a U.S. economic contraction. November retail sales fell 1.1% month-on-month, significantly missing expectations (-0.3%). Last month's figure was also revised from a 0.3% increase to a 0.1% decrease, reflecting a real slowdown in consumption.
Meanwhile, the U.S. Congress, after lengthy negotiations, came close to agreeing on an additional stimulus package of about $900 billion. The agreement was expected to be announced within the day. The package includes one-time support measures added during negotiations, excluding the liability shield and state government aid proposed recently by bipartisan lawmakers. Senate Republican Leader Mitch McConnell and House Speaker Nancy Pelosi (Democrat) both made positive remarks, increasing the likelihood of an announcement within the day. However, the stock market impact was limited. Notably, small- and mid-cap stocks, which had maintained an upward trend on this expectation, showed weakness.
Meanwhile, the Federal Reserve adjusted the U.S. economic growth forecast for this year upward from -3.7% announced in September to -2.4%, and next year's growth forecast from 4.0% to 4.2%, expressing confidence in the U.S. economy. Particularly positive was the upgrade of the economic outlook from "risks" to "balanced" in detailed assessments.
The MSCI Korea Index ETF fell 0.76%, while the MSCI Emerging Markets Index ETF rose 0.48%. Considering this, the Korean stock market is expected to open down about 0.5%.
◆ Han Dae-hoon, SK Securities Researcher = The last FOMC of the year has ended. As expected, the benchmark interest rate was kept unchanged, and bond purchases were promised to continue. There was no major change. Since continuous stimulus was promised, policy uncertainty has been resolved, and the stock market's strength is expected to continue. Although there were no surprising remarks or announcements at this FOMC, the continuation of an accommodative stance suggests asset prices will keep rising. Whether intentional or not, attention is drawn to the Fed's tolerance toward new growth engines such as the Green New Deal and the digital asset market, which are expected to rapidly expand in the future.
For the first time, the Fed expressed its intention to respond to climate change and indicated strong support for the Biden administration's renewable infrastructure investments. The Fed's continued liquidity supply is expected to lead to currency depreciation, which will help the growth of the digital asset market, including Bitcoin. Leading global financial institutions are expected to drive this growth as they make market entry more visible.
The world is changing rapidly, and this was reaffirmed at this FOMC. With the Fed's continued accommodative policy, the upward trend in asset markets is expected to continue. Given the inevitable currency depreciation at this point and the growth potential of companies related to the Green New Deal and digital currencies confirmed this time, it is judged that now is the time to expand investments in these areas.
◆ Seo Jung-hoon, Samsung Securities Researcher = The December FOMC results announced that day met market expectations. The benchmark interest rate and quantitative easing scale were maintained as before, but Chairman Powell emphasized that the current stance would be maintained until significant improvements in economic conditions are achieved.
Looking at the U.S. stock market by sector the previous day, the consumer discretionary sector rose 1.07%, recording the highest increase, followed by IT and consumer staples showing relative strength.
Expectations for COVID-19 vaccines and U.S. stimulus packages are factors driving market gains, but concerns over the resurgence of COVID-19 are also a considerable burden on the domestic stock market. Accordingly, it is judged that the index is likely to show limited movement for the time being.
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