[Good Morning Stock Market] March FOMC Uncertainty Eases... "Slightly Positive Opening Expected"

▲Jerome Powell, Chair of the Federal Reserve (Fed) [Image source=Yonhap News]

[Asia Economy Reporter Kwon Jae-hee] The U.S. stock market started off strong as President Joe Biden mentioned that he would not deploy U.S. troops to the Russia-Ukraine war. Along with Federal Reserve (Fed) Chair Jerome Powell's dovish remarks and the highlighted possibility of dialogue between Russia and Ukraine, investor sentiment appears to have improved positively. Accordingly, the domestic stock market is also expected to start higher.

Sangyoung Seo, Director at Mirae Asset Securities: "The variable is the Ukraine situation... Focus on foreign trading trends"

Accordingly, the Korean stock market is expected to start about 0.5% higher. Fed Chair Jerome Powell's announcement of avoiding aggressive monetary policy and aiming for cautious policy considering the Ukraine situation is also positive for the Korean stock market.

However, changes are expected depending on whether the Russia-Ukraine talks take place and their content.

In particular, it is necessary to pay attention to foreign trading trends as negative foreign supply and demand factors due to concerns about global economic slowdown and uncertainties surrounding the Ukraine situation are expected to clash with positive foreign supply and demand factors from the less hawkish Fed monetary policy.

Jiyoung Han, Researcher at Kiwoom Securities: "Market relief from Powell's remarks... Need to focus on reopening"

On the 2nd (local time), the U.S. stock market surged thanks to news of the second Ukraine-Russia negotiations and Fed Chair Powell's less hawkish hearing remarks than expected.

At the start of trading, the U.S. February ADP nonfarm private employment surprise and news of the second Ukraine-Russia talks led the S&P 500 to open 0.6% higher. During the session, the index's gains expanded due to Powell's dovish remarks. Powell mentioned that the policy would "proceed carefully," which seems to have positively influenced the market by easing concerns about rapid tightening.

In particular, after Powell's statement supporting a 25 basis point rate hike at the March FOMC, the market appears to have factored in the 25bp hike in March and is relieved.

However, if the Ukraine situation calms faster than expected or high inflation persists, acceleration of rate hikes should also be considered.

Also, President Biden emphasized in his State of the Union address that controlling inflation is the top priority, highlighting efforts to support supply chain normalization, reduce drug prices, and lower energy costs, which also deserve attention.

The domestic stock market will be influenced by Ukraine-related news throughout the day but is expected to show an upward trend supported by some easing of uncertainty about the March FOMC and the sharp rise in the U.S. stock market.

Additionally, as seen from the sharp rise in U.S. department stores and retail sectors such as Nordstrom (37.8%) and Macy's (6.7%) due to strong earnings, U.S. consumer spending, closely related to Korea's export performance, appears solid. At the same time, since the reopening theme is also valid in the U.S. stock market, it is worth paying attention to reopening-related stocks in the domestic market as well.