[Good Morning Stock Market] US Stocks Rise on Rate Cut Expectations... "KOSPI Expected to Start Up 0.3%"

Powell's Remarks Interpreted as Dovish, Leading to Rise
"Expecting Favorable Investor Sentiment Due to Eased Financial Conditions"

Image source=Reuters·Yonhap News

The domestic stock market is expected to start higher on the 4th. It is analyzed that expectations of an interest rate cut will have a positive impact on investor sentiment.

On the 2nd (local time), the U.S. stock market closed higher following remarks by Federal Reserve (Fed) Chair Jerome Powell. The Dow Jones Industrial Average rose 294.61 points (0.82%) to 36,245.50, the S&P 500 index increased 26.83 points (0.59%) to 4,594.63, and the tech-heavy Nasdaq index closed up 78.81 points (0.55%) at 14,305.03.

The Dow recorded its highest level since January last year, the S&P 500 since March last year, and the Nasdaq reached its highest point since July this year.

The U.S. stock market rose as the market interpreted Chair Powell’s remarks as dovish. Powell stated at Spellman University, "It is too early to confidently conclude that we have achieved a sufficiently restrictive stance, and likewise, it is too early to forecast when policy might ease."

However, he also mentioned, "We are prepared to tighten policy further if we judge it appropriate," leaving the door open for additional tightening. Although his comments aimed to balance expectations by delaying hopes for a rate cut, they were interpreted more dovishly. This is because there has been almost no content within the Fed to curb expectations for rate cuts. The market believes it will be difficult for the Fed to raise rates further and has begun pricing in up to a 1.25 percentage point rate cut next year.

U.S. manufacturing indicators showed economic contraction. The Institute for Supply Management (ISM) reported the November Manufacturing Purchasing Managers’ Index (PMI) at 46.7, the same level as the previous month, and below the market expectation of 47.7. The ISM Manufacturing PMI has remained below 50 for 13 consecutive months, indicating ongoing contraction. An index below 50 signifies that the manufacturing sector is in a contraction phase.

The KOSPI is expected to open 0.3?0.6% higher on the 4th. Seokhwan Kim, a researcher at Mirae Asset Securities, explained, "Despite the weak manufacturing PMI results, the U.S. stock market closed higher as Chair Powell emphasized that monetary policy remains restrictive and advocated a cautious approach." He added, "The easing of global financial conditions is expected to create a favorable investment sentiment for the domestic stock market. Recently, export conditions have improved, centered on semiconductors, which is also positive, and the decline in government bond yields is expected to reduce the domestic economic burden."