[Good Morning Stock Market] US Market 'Taking a Breather'... "KOSPI Expected to Start Lower"

"Need for a Process to Narrow the Gap in Interest Rate Cut Intensity for the Time Being"

Image source=EPA·Yonhap News

On the 18th, the domestic stock market is expected to start lower. The market's expectations for the results of the December Federal Open Market Committee (FOMC) regular meeting are likely to be affected by remarks indicating that interest rate cuts are not a topic of discussion at the Federal Reserve (Fed).

On the 15th (local time), the Dow Jones Industrial Average closed at 37,305.16, up 56.81 points (0.15%) from the previous session, while the large-cap focused S&P 500 index closed at 4,719.19, down 0.36 points (0.01%). The tech-heavy Nasdaq index ended the day at 14,813.92, up 52.36 points (0.35%).

As Fed Chair Jerome Powell’s remarks about discussing rate cuts were clarified, market enthusiasm cooled. John Williams, President of the New York Federal Reserve Bank, explained, "We are really not talking about rate cuts right now," adding, "As Chair Powell said, we are very focused on the question before us of whether we can achieve a sufficiently restrictive monetary policy to ensure inflation returns to 2%."

Regarding the question about the interest rate futures market pricing in a possible cut in March, he said, "I think it is premature even to think about that," adding, "From a sufficiently restrictive standpoint, we are at or near the peak, but the situation can change." He also added, "What we have learned over the past year is that indicators can move, and if inflation progress is delayed or reversed, we must be prepared to tighten further."

In this context, the U.S. service and manufacturing sectors showed mixed results in December. The preliminary December Services Purchasing Managers' Index (PMI) released by S&P Global recorded 51.3, exceeding the market expectation of 50.7. On the other hand, the preliminary U.S. Manufacturing PMI for December was 48.2, below the market expectation of 49.5.

On the 18th, the KOSPI index is expected to start down by 0.2 to 0.5%. There is also advice to pay attention to exchange rate trends, as sensitivity to the Korean won against the dollar is increasing. Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "Considering that the won-dollar exchange rate was around 1,290 won in the same dollar index range this year, it is forming about 10 won higher."

Kim Ji-hyun, a researcher at Kiwoom Securities, said, "Since there is a widening gap among market participants regarding the intensity of rate cuts, a process to narrow the gap between the Fed and the market, and among market participants, is needed for the time being."