[Good Morning Stock Market] Caution Ahead of US CPI Release... "KOSPI Expected to Start Higher"

October Core CPI Expected Unchanged from Previous Month
Inflation Upward Pressure Due to Changes in Health Insurance Premium Estimation Method
US Congress Budget Agreement Also a Variable

[Image source=Yonhap News]

On the 14th, the Korean stock market is expected to start higher, but caution is likely to increase ahead of the release of the US October Consumer Price Index (CPI).

On the previous day (local time), the US stock market closed mixed ahead of major events such as the CPI, retail sales, earnings of large retailers, and budget negotiations. The Dow Jones Industrial Average closed at 34,337.87, up 54.77 points (0.16%) from the previous session. The large-cap S&P 500 index fell 3.69 points (0.08%) to 4,411.55, and the tech-heavy Nasdaq index ended down 30.36 points (0.22%) at 13,767.74.

The market's focus is on the US October CPI figures released that day. The headline CPI is expected to slow to 3.3% year-on-year from 3.7% recorded last month. However, the core CPI is forecast to remain at 4.1%, the same as last month, raising concerns that sticky inflation may persist for a long time.

The inflation nowcasting estimated by the Cleveland Federal Reserve also projects a level similar to market expectations. In particular, the month-on-month change in the headline CPI is expected to be the lowest since 0.1% recorded in March.

Seokhwan Kim, a researcher at Mirae Asset Securities, analyzed, "However, the change in the health insurance cost estimation method, which is updated every October, has been a downward pressure on inflation over the past year, but from this time, it will act as an upward pressure."

US congressional budget agreement is also one of the factors affecting the market. If a follow-up budget bill does not pass Congress by the 17th (local time), when the temporary budget agreed upon by the US Congress expires, a federal government shutdown may occur. Earlier, House Speaker Mike Johnson proposed a two-step package to avoid a government shutdown, but this bill excluded all the budget requested by President Joe Biden. The 'ping-pong game' between the Democrats and Republicans is expected to continue until the agreement deadline.

Researcher Kim said, "Except for the 6th, the domestic stock market has fallen for 4 consecutive days in the KOSPI and 5 consecutive days in the KOSDAQ over the past 5 trading days," adding, "It is expected to fluctuate according to US economic indicators and schedules amid supply and demand gaps."