[Good Morning Stock Market] "US Inflation Has Peaked"... Will KOSPI Continue Its Rebound on Peak-Out Expectations?

[Asia Economy Reporter Ji Yeon-jin] The U.S. stock market continues its upward trend amid expectations of an 'inflation peak-out.' Low-price buying surged mainly in technology stocks, which had sharply fallen due to concerns over stagflation (a phenomenon where inflation and economic recession occur simultaneously), causing the Nasdaq index to rise sharply. On the 27th (local time), the Nasdaq index jumped 3.33% compared to the previous day, while the Standard & Poor's (S&P) 500 index and the Dow Jones index recorded gains of 2.47% and 1.76%, respectively.

The Personal Consumption Expenditures (PCE) price index released by the U.S. Department of Commerce rose 6.3% year-on-year and 0.2% month-on-month. This figure is lower than the 6.6% year-on-year increase in March, which was the largest rise in 40 years. The inflation indicator referenced by the U.S. central bank, the Federal Reserve (Fed), showed a slowdown in its rate of increase for the first time in a year and a half since November 2020.

◆ Sangyoung Seo, Kiwoom Securities Researcher = Last weekend, the U.S. stock market started higher as expectations for an 'inflation peak-out' rose following the PCE price index announcement. Additionally, reports emerged that Tesla (+7.33%) had entered an attractive buying zone following Nvidia (+5.38%), leading to gains centered on technology stocks that had experienced significant declines, resulting in a strong surge in the Nasdaq.

The U.S. stock market's strength amid rising expectations of an inflation 'peak-out' is expected to have a positive impact on the Korean stock market. Furthermore, reports released on Friday, following Nvidia on Thursday, indicated that Tesla and Roku had also entered attractive buying zones, which is favorable. This is because buying sentiment increases during declines caused by overselling, a recent market theme. Supported by positive foreign demand due to inflation peak-out expectations and stability in the won-dollar exchange rate, the Korean stock market is expected to start with an increase of around 0.7% and maintain a solid trend.

◆ Jiyoung Han, Kiwoom Securities Researcher = This week, the KOSPI is expected to continue its rebound influenced by major economic indicators such as Korea's May exports, the U.S. May ISM Manufacturing PMI and employment data, remarks from key Federal Reserve officials including those from St. Louis, and whether inflation concerns ease. The expected KOSPI range this week is between 2580 and 2720.

Considering the recent process of confirming the bottom with higher lows and the rebound in the stock market, pessimism surrounding major stock markets such as Korea and the U.S. appears to have peaked. However, the subsequent trend reversal in the stock market depends on whether inflation levels significantly decrease by the end of the year. A key event influencing the short-term direction of the domestic stock market this week is Korea's May exports, which are expected to increase by 19.5% year-on-year. If major economic indicators such as the U.S. May ISM Manufacturing Purchasing Managers' Index (PMI) show better-than-expected performance, it is anticipated to alleviate concerns about economic and earnings recessions that have been central to market anxiety, thereby improving overall risk asset preference in the stock market.

◆ Sanghyun Park, Hi Investment & Securities Researcher = The value of the U.S. dollar declined for the second consecutive week. Some of the pressures supporting dollar strength weakened, and although the April PCE price index met market expectations, the slowdown in the month-on-month increase strengthened the inflation peak theory, contributing to the dollar's weakness. Above all, the downward stabilization of U.S. Treasury yields had a significant impact on the dollar's weakening trend. Due to the dollar's weakness, the euro also rebounded sharply for two consecutive weeks. The won-dollar exchange rate also declined for two consecutive weeks. The unexpectedly strengthened hawkish voices and additional rate hikes expected at the Bank of Korea's Monetary Policy Committee meeting in May contributed to the won's strength. Additionally, the rebound in global stock markets and the weakening of safe-haven asset sentiment also helped strengthen the won.

The upcoming release of the U.S. May ISM Manufacturing Index and employment data this week will once again serve as indicators to assess the U.S. economy, specifically recession risks and inflation pressures, which will likely determine whether the dollar continues to decline. Considering only current market consensus, there is a higher probability that the dollar will weaken further or remain stable rather than rebound. The partial easing of the Shanghai lockdown scheduled for June 1 is also a noteworthy event. If the Shanghai lockdown is eased, expectations for an economic rebound due to the full-scale implementation of China's economic stimulus measures will revive, exerting upward pressure on the yuan. Although won strength sentiment has revived after a long time, variables such as oil price instability still remain as factors limiting the downside.

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