"Is KOSPI 2500 Out of Reach This Week?"... 'Jackson Hole Aftermath' Nasdaq Plummets 4%, 'Nervous'

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] Over the weekend, Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), made hawkish remarks, causing the Nasdaq index to plunge nearly 4%, intensifying fears of interest rate hikes. As a result, the KOSPI is expected to have a somewhat challenging start this week.

On the 28th, the financial investment industry forecasted the KOSPI's expected range for this week to be between 2420 and 2520 points. Last week, the KOSPI closed at 2481.03, down 0.47% from the previous week. After breaking below the 2500 mark on the 19th and declining for three consecutive trading days, the KOSPI rebounded on the 24th, a day before the Bank of Korea's Monetary Policy Committee meeting. On the 25th, the Bank of Korea's Monetary Policy Committee raised the base interest rate for the fourth consecutive time for the first time in history, but the KOSPI showed resilience. In fact, after the rate hike announcement on the 25th, the KOSPI rebounded by over 1% and nearly recovered to the 2500 level during intraday trading the following day. Since the domestic base rate hike was already anticipated, it is interpreted that the impact on the stock market was not significant.

This week, the KOSPI is expected to be influenced by the Jackson Hole meeting. This is because the event caused a greater shock to the market than initially expected by the securities industry. At the Jackson Hole Economic Policy Symposium in Wyoming, Chairman Powell emphasized the importance of price stability, stating, "A single month of improvement in inflation data is far from enough to be confident that inflation has come down." This statement was far from market expectations. Consequently, the Nasdaq index plunged nearly 4%, and Nvidia fell more than 9%. The concern is that the Fed's tightening is expected to accelerate starting in September.

Kim Young-hwan, a researcher at NH Investment & Securities, said, "As the Fed continues to reduce liquidity, the real economy is experiencing the shock of interest rate hikes, and a bear market due to earnings declines may emerge in the stock market." He added, "We recommend maintaining a defensive portfolio focused on structurally growing stocks unrelated to the economy, policy beneficiaries, and defensive stocks."

This week's market will see the release of major economic indicators such as South Korea's August industrial activity trends and export performance, the Eurozone's August Consumer Price Index (CPI), and U.S. employment and unemployment rates. Additionally, interest in the Federal Open Market Committee (FOMC) meeting scheduled for late next month is expected to increase.

Jo Byung-hyun, a researcher at Daol Investment & Securities, said, "While it is confirmed that the upward trend in U.S. inflation indicators is easing, inflationary pressures in other regions remain." He added, "It is also necessary to verify whether the domestic Consumer Price Index (CPI) and the Eurozone's Producer Price Index (PPI) have stabilized." He continued, "Since there are signs of weakness in detailed U.S. employment indicators, it is important to pay attention to whether U.S. employment indicators worsen, even if the unemployment rate remains steady."

Researcher Kim said, "Attention is focused on the U.S. employment data to be released on the night of the 2nd. When the August data is released, revised data for July will also be published, and there is a possibility that the July figures may be revised downward." However, he added, "Unless there is a major employment shock, it is unlikely to affect the Fed's monetary policy." He continued, "Currently, the focus is more on inflation than on economic slowdown. Since the 10-year bond yields are rising in both the UK, which has signaled a recession, and the Eurozone, where a winter recession is likely, it is believed that inflation carries more weight than the economy."

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