[Good Morning Stock Market] "Downward Pressure on Domestic Stock Market Inevitable... Focus on Inflation"

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[Asia Economy Reporter Kwon Jaehee] Amid escalating tensions between Western countries and Russia, the risk of war continues, leading the U.S. stock market to close lower with downward pressure centered on growth stocks. The prolonged Ukraine crisis beyond expectations, ongoing sanctions against Russia, and rising commodity prices contributing to inflationary pressures have acted as downside factors for the U.S. stock market.

Han Ji-young, Kiwoom Securities Researcher: "Downward Pressure Inevitable... This Year's Market Direction Depends on 'Inflation'"

The domestic stock market is expected to face downward pressure due to the weak U.S. stock market amid growing inflation caution and profit-taking following a short-term surge in the previous trading day.

Earlier on the 2nd, Fed Chair Jerome Powell provided some relief to the market by supporting a 25bp rate hike. However, on the 3rd during the Senate testimony, he raised the tone regarding inflation, increasing market caution. While noting the need to observe the impact of the Ukraine crisis on the Fed's outlook, his remarks implied that if inflation rises further, a significant rate hike could be implemented.

Ultimately, this year's market direction appears to hinge on inflation. At present, the unexpected war has caused sharp increases in energy, agricultural products, and other commodity prices, making it difficult to gauge the inflation trajectory. However, if the Ukraine crisis enters a calming phase, commodity prices that had surged are expected to return to pre-Ukraine crisis levels. Although the second round of talks between Ukraine and Russia did not result in a dramatic negotiation settlement, attention should be paid to the agreement on humanitarian corridors and ceasefire in the affected areas, along with plans for a third round of talks.

Accordingly, the domestic stock market is expected to face downward pressure today. As market attention, which had been extremely focused on the Ukraine crisis, shifts to the Fed, caution regarding the U.S. February employment data is also expected to impact the domestic market. Although it will likely be a day with high downward pressure, the overall easing of valuation burdens in the market, confirmed earnings resilience through stronger-than-expected February export figures, and solid earnings strength are expected to provide downside rigidity to the index.

This content was produced with the assistance of AI translation services.