[Good Morning Stock Market] US Stock Market Stretches After a While... Expectations for Dollar Stabilization

U.S. Stock Market Stretches After 8 Trading Days
Fed Vice Chair Raises Recession Concerns Amid Tightening
Dollar Weakens, Market Outlook Shifts

[Asia Economy Reporter Junho Hwang] Amid the continued strength of the dollar, on the 7th (local time), U.S. Treasury yields fell after Lael Brainard, Vice Chair of the U.S. Federal Reserve (Fed), voiced caution against excessive tightening, leading the U.S. stock market to rise for the first time in eight trading days. As the dollar's value increased, currencies across Asia, including South Korea, weakened, and stock markets plunged amid growing concerns over economic slowdown. However, ahead of the Chuseok holiday on the 8th, the market is expected to show a sideways trend.

With attention focused on Fed officials' remarks amid the strong dollar, Vice Chair Brainard stated, "At any point in the tightening cycle, risks will be two-sided," adding, "Uncertainty surrounding the pace of tightening and the impact of the tightening cycle on the rest of the world pose risks associated with excessive tightening." As the Fed undertakes aggressive tightening to curb inflation, concerns about a recession have also emerged, causing the two-year Treasury yield to drop intraday to 3.433%. As yields fell, relief spread that the dollar, which had been rising continuously, might ease, and U.S. stock markets rose across the board. The Dow increased by 1.40%, the S&P by 1.83%, and the Nasdaq by 2.14%.

Ji-young Han, a researcher at Kiwoom Securities, analyzed, "In the Beige Book released on the 7th, the Fed assessed that there were no significant overall economic changes but projected further demand weakening over the next 6 to 12 months. Vice Chair Brainard also emphasized the justification for rate hikes to combat inflation while warning of the risks that rapid and excessive tightening could cause."

However, on the same day, the U.S. economic media outlet The Wall Street Journal reported that based on Fed Chair Jerome Powell's declaration at the Jackson Hole Economic Policy Symposium on the 26th of last month?despite concerns that unemployment would rise?the Fed is expected to implement a third consecutive 'Giant Step' (a 0.75 percentage point rate hike) and maintain high rates for a considerable period.

The recent upward trend in the U.S. stock market is also expected to have a positive impact on the domestic market.

Seok-hwan Kim, a researcher at Mirae Asset Securities, stated, "Last night, confidence in easing inflation expanded in the U.S. stock market, increasing preference for risk assets, which is expected to be positive for the domestic stock market."

He added, "Ahead of the simultaneous expiration of futures and options today, it is worth anticipating the inflow of basket sell orders through arbitrage and non-arbitrage trading. From that perspective, it is advisable to pay attention to exchange-traded funds tracking the KOSPI 200 and KOSDAQ 150."

Another researcher forecasted, "The domestic stock market is expected to rebound, supported by the perception of overselling from the previous day, the U.S. stock market rebound, and the easing of the sharp rise in the won/dollar exchange rate, which had reached the 1,390 won level offshore (currently around 1,374 won offshore). The rebound momentum will vary across sectors and themes due to individual positive factors such as falling interest rates (growth stocks), declining oil prices (airline stocks, etc.), and the new iPhone unveiling (Apple value chain-related stocks)."

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