[Market ING] KOSPI Recovers to 2700, Will It Navigate This Week's Big Events Well?

Expected KOSPI Band Between 2630 and 2750

The stock market this week (June 10?14) is expected to be influenced by the outcomes of key events such as the June U.S. Federal Open Market Committee (FOMC) meeting and the U.S. May inflation indicators.

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Last week, the KOSPI rose by 3.27%, and the KOSDAQ increased by 3.12%. The KOSPI closed the week by recovering the 2700 level, while the KOSDAQ also regained the 860 level. Jin-hyuk Kang, a researcher at Shinhan Investment Corp., analyzed, "The start of June was not bad. Following the U.S. April Personal Consumption Expenditures (PCE) price index that met expectations, the U.S. Job Openings and Labor Turnover Survey (JOLT) job openings fell short of previous figures and expectations, which boosted hopes for a rate cut. As a result, U.S. Treasury yields sharply declined, and domestically, sectors that had been neglected such as pharmaceuticals, biotechnology, and secondary batteries showed a rebound." He added, "After the president’s national briefing, sectors like oil, refining, and steel have absorbed market supply and demand."

Important events that will determine the market trend are scheduled this week, and the market is expected to be highly attentive. The June FOMC results will be released early on the 13th, while the May Consumer Price Index (CPI) will be announced on the night of the 12th, and the May Producer Price Index (PPI) on the night of the 13th. Kyung-min Lee, a researcher at Daishin Securities, stated, "This week is the biggest turning point for the June stock market as we can confirm both monetary policy and inflation trends," adding, "Depending on the results, the market could either enter an additional rally and overshooting phase or a turning point for a downward reversal."

The market expects the FOMC to revise the dot plot downward this time, and whether the dot plot for next year is maintained will be a key issue. Young-hwan Kim, a researcher at NH Investment & Securities, said, "Although the U.S. Federal Reserve (Fed) is not expected to give a clear signal for rate cuts, attention will focus on the Fed’s economic outlook and dot plot announcement. The median of the March dot plot predicted three rate cuts each in 2024 and 2025, but this time a reduction in the number of cuts seems inevitable. The forecast for the number of cuts in 2024 is expected to shrink to 1?2 times within the year." He added, "The key is whether the forecast of three cuts in 2025 is maintained; if there is a further reduction, the financial market may be somewhat disappointed."

He further explained, "The Fed’s dot plot is likely to be revised downward while economic and inflation forecasts may be revised upward. The dot plot is expected to be adjusted to two rate cuts in 2024 and maintain three cuts in 2025. Although Fed officials are becoming more cautious and somewhat hawkish (favoring monetary tightening), it is unlikely that the dot plot will move to reflect even one rate cut within this year." He predicted that if the three rate cuts in 2025 are maintained, the market will feel relieved. He said, "Since the disinflation argument remains valid, the 2025 dot plot is expected to maintain three rate cuts, which could bring relief beyond just calming anxiety in the global financial markets. This is because the market has already priced in one rate cut within the year since late April."

The slowdown in inflation is also important. If the inflation slowdown is confirmed to be continuing, expectations for rate cuts will expand, and stock prices are expected to rise. The researcher said, "Whether the slowdown in May CPI and PPI continues is also crucial. If core CPI slowdown and month-on-month PPI slowdown are confirmed, it could mark two consecutive months of decelerating inflation following April, leading to expectations for a rate cut at the July FOMC." He added, "If monetary policy relief and disinflation expectations are incorporated, the KOSPI could enter an overshooting phase exceeding our June upper target of 2830 points."

Since corporate earnings are supporting the stock market, the outlook is expected to be positive. Researcher Kim said, "The stock market is expected to digest the June economic data releases and monetary policy events without major difficulties. The favorable earnings outlook, especially among big tech companies, is also a factor supporting the market, and expectations for the Q2 earnings season will inject positive confidence into the stock market." NH Investment & Securities has set the expected KOSPI band for this week at 2630?2750 points.

Key schedules this week include the Chinese shipping holiday on the 10th, China’s May CPI and PPI, and the U.S. May CPI announcement on the 12th. On the 13th, the FOMC results and U.S. May PPI will be released. On the 14th, the U.S. University of Michigan Consumer Sentiment Index for June will be announced.