[Good Morning Market] US Stocks Fall on 9% CPI... Foreign Investor Supply-Demand Instability Inevitable

[Image source=Yonhap News]

[Asia Economy Reporter Myung-Hwan Lee] On the 14th, the domestic stock market is expected to face inevitable foreign investor supply and demand instability due to the sharper-than-expected rise in the U.S. June Consumer Price Index (CPI). However, there is also a forecast that the limited decline in the U.S. stock market, driven by expectations of an inflation peak-out, will have a favorable impact.

According to the U.S. Department of Labor on the 13th (local time), the June CPI rose 9.1% compared to the same month last year. This figure surpasses last month's 8.6%, which was the largest increase since December 1981, and also exceeds the expert forecast of 8.8%.

The U.S. stock market fell as concerns over tightening intensified due to the CPI exceeding expectations. However, the possibility of a price peak limited the extent of the decline. On the 13th, the Nasdaq index, centered on technology stocks, closed at 11,247.58, down 0.15% (17.15 points) from the previous trading day. The Dow Jones Industrial Average fell 0.67% (208.54 points) to 30,772.79, and the Standard & Poor's (S&P) 500 index closed down 0.45% (17.02 points) at 3,801.78.

Sang-Young Seo, Head of Media Content at Mirae Asset Securities: "KOSPI expected to start with a slight rise... Foreign investor supply and demand instability inevitable due to CPI"

On the 14th, the domestic stock market is expected to start with a slight rise, but the process of absorbing sell-offs is inevitable due to foreign investor supply and demand instability, considering the Federal Reserve's aggressive moves.

Although the U.S. stock market started sharply lower due to the higher-than-expected inflation data, the growing expectation of an inflation peak-out helped reduce the decline, especially in the Nasdaq, which is expected to have a positive effect on the Korean stock market. Supported by this, the dollar weakened, and the offshore non-deliverable forward (NDF) won-dollar exchange rate fell, highlighting the possibility of won appreciation. In particular, news that pessimistic forecasts about the semiconductor industry were excessive led to a 0.75% rise in the Philadelphia Semiconductor Index, which is also favorable.

However, the Bank of Canada raised its benchmark interest rate by 1 percentage point, and considering the high U.S. inflation, the possibility of a 1 percentage point hike at the July Federal Open Market Committee (FOMC) meeting reached 82%, increasing the likelihood of aggressive Fed rate hikes, which is a burden. Especially, the Fed's Beige Book mentioning slowing consumer spending and weak production activity is also a factor dampening investor sentiment.

Yumi Kim, Researcher at Kiwoom Securities: "Volatility expands as CPI results are digested... Market focus shifts to earnings"

On the 14th, the domestic stock market may experience increased volatility as it digests the U.S. CPI results. Given that it is an options expiration day, additional supply and demand volatility may also expand. However, considering that the Nasdaq's decline was limited the previous day and that the KOSPI rose amid perceptions of uncertainty resolution despite the Bank of Korea's 0.5 percentage point big step rate hike, it is judged that inflation concerns have been somewhat priced in.

Immediately after the U.S. June CPI announcement, concerns about accelerated Fed tightening were reflected following last week's strong employment data, but the market has since focused on the fact that inflation is expected to peak out in July.

As the earnings season officially begins centered on the U.S., market attention is expected to shift to corporate earnings. Since commodity prices have been falling since June, expectations that inflation will peak out in July may continue, but until the July FOMC, volatility is inevitable as the market prices in a 1 percentage point rate hike. Recession concerns remain due to the inverted yield curve and the unusual strong dollar environment. Rather than predicting which sectors will show strong rebounds, it is necessary to focus on individual companies' Q2 earnings and Q3 earnings estimates reflecting the demand slowdown observed since June.

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