[Good Morning Stock Market] US CPI Meets Expectations... Stock Market Focuses on Won-Dollar Exchange Rate

CSAT on the 14th, Stock Market Opens at 10 AM
Won-Dollar Exchange Rate Above 1400 Won

On the 14th, the Korean stock market is expected to start weak, focusing on the won-dollar exchange rate. While the U.S. October Consumer Price Index (CPI) met market expectations, the exchange rate, which had fallen below the 1,400 won level overnight, rose above 1,400 won again. The 10-year U.S. Treasury yield also approached 4.5% once more.

On the 13th (local time), the Dow Jones Industrial Average closed at 43,958.19, up 47.21 points (0.11%) from the previous trading day in the New York stock market. The S&P 500 index rose 1.39 points (0.02%) to 5,985.38, while the Nasdaq index closed at 19,230.74, down 50.66 points (0.26%).

On the same day, the U.S. Department of Labor announced that the October CPI rose 0.2% month-over-month to 2.6%, in line with market expectations. The core CPI, excluding food and energy, recorded 3.3%, up 0.3 percentage points from the previous month, matching forecasts. As a result, expectations strengthened that the U.S. Federal Reserve (Fed) will cut the benchmark interest rate by 0.25 percentage points next month.

The most important factor affecting the domestic stock market today is the exchange rate. On the 12th, based on the weekly closing price, the exchange rate closed at 1,403.50 won, surpassing 1,400 won for the first time in about two years since November 7, 2022. The authorities verbally intervened in the exchange rate the previous day, and the Financial Services Commission decided to maintain the bond market stabilization fund. Along with this, the macroeconomic and financial issues meeting has been moved up by one day and will be held today.

Han Ji-young, a researcher at Kiwoom Securities, analyzed, "The exchange rate, which had fallen below the 1,400 won level overnight, rose back above 1,400 won, and the 10-year U.S. Treasury yield, which had fallen below 4.4%, returned to its previous level. The news that the Republican Party controls both the U.S. House and Senate seems to have highlighted the negative aspects of the Trump trade once again in the foreign exchange and bond markets."

Han added, "Considering the speed of valuation level down and the pace of foreign net selling, switching to sectors with bright profit outlooks or narratives is reasonable for trading in the domestic stock market. Deciding to exit the market at the current price level does not have significant practical benefits."