[Weekly Market Outlook] Stock Market Blocked by High Oil Prices, Cautious Sentiment Expected Ahead of US Inflation Data

The stock market this week (September 11-15) is expected to remain cautious ahead of the release of U.S. inflation data. Recently, concerns over high oil prices and inflation have negatively impacted the market, increasing the desire to closely monitor the inflation indicators.

Last week, the KOSPI fell by 0.63%, and the KOSDAQ dropped by 0.60%. The KOSPI ended the week after continuing a four-day losing streak.

[Image source=Yonhap News]

Concerns over inflation driven by high oil prices led to a weak stock market. Younghwan Kim, a researcher at NH Investment & Securities, explained, "Last week, news of extended oil production cuts by Russia and Saudi Arabia caused international oil prices to rise for nine consecutive trading days, expanding downward pressure on the stock market due to inflation concerns driven by high oil prices."

As inflation worries grow due to high oil prices, market attention is expected to focus on the U.S. August Consumer Price Index (CPI) and Producer Price Index (PPI) to be released on the 13th and 14th. Yujun Choi, a researcher at Shinhan Investment Corp., said, "The impact of the U.S. August inflation data has increased. July CPI rose slightly month-over-month, and August is likely to continue rebounding, so it is necessary to pay attention to the effects of rising oil prices."

Bloomberg consensus forecasts CPI at 3.6% and core CPI at 4.3%. The previous month recorded 3.2% and 4.3%, respectively. Kyungmin Lee, a researcher at Daishin Securities, analyzed, "The CPI rebound and core CPI slowdown are due to the disappearance of base effects, oil price rebound, and easing housing costs. Recently, the month-over-month CPI forecast has been revised upward due to rising oil prices, and when reflecting the increase in August gasoline prices and weighting, the month-over-month growth rate could be raised by up to 0.5%." He added, "However, since consensus expecting a higher increase has recently emerged, the actual result is likely to be lower than expected."

The stock market is expected to remain sideways for the time being. Researcher Kim said, "There are no significant changes in macroeconomic conditions related to the overall stock market, such as interest rates and demand, while risks in individual sectors and companies are acting as noise factors in the market. The stock index is likely to show a slightly weak trend, so in the short term, investors will try to adjust their portfolios toward relatively stable sectors, such as those benefiting from rising oil prices and sectors related to deferred demand in China." NH Investment & Securities projected the KOSPI range for this week to be between 2490 and 2610.

Securing support around the 2520 level is considered important. Researcher Lee stated, "For the time being, it will be crucial for the KOSPI to secure support at the 2520 level, which corresponds to a 50% retracement of the rebound from the low. If support is secured at this level, a strategy to increase weight in anticipation of an attempt to recover the 2600 level will be effective."

Key events to watch this week include the U.S. August CPI release on the 13th, U.S. August PPI and retail sales on the 14th, and China's August industrial production and retail sales, as well as U.S. August industrial production on the 15th.