[Good Morning Stock Market] "January PCE Caution... KOSPI Expected to Start Lower"

New York Stock Market Closes Lower Across the Board

On the 21st, when the U.S. central bank Federal Reserve (Fed) held the base interest rate steady, employees were working in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul. On that day, the KOSPI opened at 2,544.81, down 4.93 points (0.58%) from the previous session, and the won-dollar exchange rate started at 1,332.5 won, up 2.4 won from the previous trading day. Photo by Jo Yongjun jun21@

The Korean stock market is expected to start lower on the 29th. Ahead of the release of the U.S. January Personal Consumption Expenditures (PCE) data, U.S. stock markets closed broadly weaker. Downward pressure is intensifying amid cautious sentiment.

On the 28th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 38,949.02, down 23.39 points (0.06%) from the previous session. The S&P 500 fell 8.42 points (0.17%) to 5,069.76, and the Nasdaq dropped 87.56 points (0.55%) to 15,947.74.

The stock market is cautious ahead of the January PCE inflation data, which the Federal Reserve (Fed) uses as a basis for policy decisions. Despite a positive earnings season in February, strong employment and sticky inflation have lowered rate cut expectations to the current 75?100 basis points (1bp = 0.01 percentage points) range. Previously, rate cut expectations were around 150 basis points for this year. In particular, Belgium’s February Consumer Price Index (CPI) reaching its highest level since August 2023 has raised market vigilance.

The robust U.S. economy is also contributing to heightened caution. The U.S. GDP growth rate for Q4 last year was recorded at 3.2%. This preliminary figure is 0.1 percentage points lower than the advance estimate of 3.3% released last month. Government spending was revised down from 5.8% to 4.2%, and inventories decreased from 0.1% to -0.1%. Although this is a slowdown compared to the 4.9% growth in Q3 last year, considering concerns about economic slowdown due to high interest rates, the fact that growth exceeded 2% for six consecutive quarters is widely regarded as a 'solid performance.'

Ji-hyun Kim, a researcher at Kiwoom Securities, analyzed, "While spending and prices increased, the decline in inventories indicates a robust real economy last year, but it will also act as a factor raising caution ahead of tomorrow’s January PCE inflation data."

Seok-hwan Kim, a researcher at Mirae Asset Securities, also said, "Ahead of the January PCE release, the market is showing increased downward pressure reminiscent of the January CPI shock. The KOSPI is expected to start down by 0.2?0.4%."