[Good Morning Stock Market] US Stocks Weaken Amid CPI Caution... Korean Stocks Expected to Take a Breather

[Asia Economy Reporter Park Jihwan] Overnight, the U.S. New York stock market closed lower across the board amid inflation concerns and fears that tapering (asset purchase reduction) could accelerate. This outlook emerged as the possibility increased that the Federal Reserve (Fed) might speed up tapering if the Consumer Price Index (CPI) surges amid improving U.S. employment trends.

All major U.S. stock indices ended their three-day winning streak and closed lower. On the 9th (Eastern Time), at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 0.06 points (0.00%) from the previous close to finish at 35,754.69. The Standard & Poor's (S&P) 500 dropped 33.76 points (0.72%) to 4,667.45, and the tech-heavy Nasdaq declined 269.62 points (1.71%) to close at 15,517.37.

The domestic stock market, which had shown a clear upward trend over the past seven trading days, is also expected to decline due to profit-taking by investors influenced by the U.S. market. Analysts note that attention should also be paid to the impact of Evergrande Group’s limited default on Asian markets, including China, during trading hours.

◆ Seo Sangyoung, Researcher at Mirae Asset Securities = As the U.S. stock market highlighted that the Omicron variant is 4.2 times more contagious than Delta, reopening-related stocks weakened. Additionally, the sharp drop in Bitcoin, which had recently experienced high volatility, caused underperformance in related sectors, posing a burden on the Korean stock market. Furthermore, the overall U.S. market reacted more sensitively to negative issues amid strong profit-taking desires, which is also negative. Moreover, with the previous day being the futures and options expiration date, the market showed an additional 0.4% rise during the simultaneous opening price, so some retracement may occur, adding to the pressure.

Considering this, the Korean stock market is expected to start down about 0.5%. Subsequently, it is necessary to focus on whether the Evergrande Group default issue, which had little impact on the U.S. market, will affect the Chinese stock market. The offshore yuan exchange rate has weakened about 0.5% against the dollar due to this issue, increasing volatility in Chinese market-related items. However, with the upcoming U.S. Federal Open Market Committee (FOMC) meeting next week, as well as monetary policy meetings scheduled for the European Central Bank (ECB), Bank of England (BOE), and Bank of Japan (BOJ), the overall market is expected to experience a stock-specific market phase that changes according to individual stock issues rather than broad market shifts.

◆ Han Jiyoung, Researcher at Kiwoom Securities = Following strong nonfarm payrolls in November, the weekly initial jobless claims released on the 10th hit the lowest level since 1969, confirming that despite burdens such as the Delta variant surge in November, the U.S. labor market recovery is progressing steadily. The normalization of the U.S. labor market is increasing the likelihood of accelerated tapering at the December FOMC. Since the market has partially priced in the acceleration of tapering in December, market instability due to faster tapering is expected to be limited. The key issue going forward is that if inflation indicators continue to surprise on the upside, concerns may intensify that the Fed could raise interest rates faster than expected. Therefore, sensitivity to the November CPI (expected 6.7%, previous 6.2%) results is expected to be higher than during the October inflation data release.

The domestic stock market is also expected to show a breathing spell as short-term profit-taking pressure from seven consecutive days of gains and caution over U.S. November CPI weigh on it. During trading, the market will likely come under the influence of changes in the Chinese stock market due to Evergrande Group’s limited default becoming a reality. However, considering that the market has already absorbed this issue recently, the impact is expected to be limited.