[Good Morning Stock Market] US Interest Rate Cut Expectations Retreat... Limited KOSPI Rise Expected on the 8th

KOSPI Expected to Start Up 0.5~0.7%
March US Employment Exceeds 100,000
Middle East Tensions... Gold Prices Hit Record High

[Image source=Yonhap News]

On the 8th, the Korean stock market was expected to start higher but show a limited upward trend. Despite various risks such as the retreat of expectations for a U.S. interest rate cut and instability in the Middle East, the U.S. economic boom was confirmed by a 'surprise' level March employment report.

On the 5th (local time), the Dow Jones Industrial Average closed at 38,904.04, up 0.80% from the previous session. The S&P 500 rose 1.11% to 5,204.34, and the Nasdaq increased 1.24% to 16,248.52.

The U.S. Department of Labor announced that nonfarm payrolls increased by 303,000 in March this year. This exceeded market expectations (an increase of 200,000) by about 100,000. The securities industry also described this as a 'surprise' level.

Due to the strong employment data, the possibility of a U.S. interest rate cut in June has also decreased. The probability of a June rate cut by the U.S. Federal Reserve (Fed) fell to the low 50% range, and expectations for three rate cuts this year were revised down to two.

U.S. Treasury yields, considered a soundness indicator, also surged. The 2-year and 10-year Treasury yields rose to their highest levels since late November last year. The 10-year Treasury yield soared to the mid-4.4% range. The yield spread between the 10-year and 3-month bonds fell below -100 basis points (bp; 1bp = 0.01%) for the first time in four months.

Prices of safe-haven assets like gold surged. Gold prices reached $2,345 per ounce, setting a new all-time high again. Silver prices also hit their highest level since June 2021. International crude oil prices rose for six consecutive trading days, reaching $87 per barrel amid escalating geopolitical tensions between Iran and Israel.

The KOSPI was expected to open 0.5?0.7% higher on the 8th. However, the extent of the rise was expected to be limited.

Kim Seok-hwan, a researcher at Mirae Asset Securities, analyzed, "The U.S. stock market rose due to expectations of strong economic recovery despite the rise in Treasury yields following the March employment surprise. This could imply an increase in the weighting of risk assets, but the retreat in Fed rate cut expectations and the sharp rise in international oil and gold prices may reflect pricing of other risks."