[MarketING] Stock Market Holds Its Breath Ahead of Economic Indicator Announcements

KOSPI Falls Below 2400 After 8 Trading Days
Focus on Employment Report to Be Released Today
Inflation Indicators Scheduled for Next Week

[Image source=Yonhap News]

The KOSPI closed lower for the third consecutive day, falling below the 2400 mark for the first time in eight trading days. The KOSDAQ, which had shown relative strength compared to the KOSPI, declined even more sharply, breaking below the 800 level after five days. With concerns about tightening rising again and key economic indicators that will influence the U.S. Federal Reserve's (Fed) interest rate decisions pending release, market caution is unlikely to ease anytime soon.

KOSPI Falls Below 2400, KOSDAQ Drops to 780

On the 10th, the KOSPI closed at 2394.59, down 24.50 points (1.01%) from the previous day. The KOSDAQ ended the day at 788.60, down 20.62 points (2.55%). Ahead of the employment report release, market caution intensified, and the stock market remained weak. Additionally, liquidity risks in U.S. small and medium-sized banks and negative factors such as the budget bill from the previous day further widened the decline.

Seokhwan Kim, a researcher at Mirae Asset Securities, explained, "As the U.S. stock market declined due to concerns over the February employment report and political and financial system instability, investment sentiment across Asian markets weakened, causing sharp drops in both the KOSPI and KOSDAQ. In particular, the KOSDAQ fell more than 2%, breaking below the 800 level, due to Nasdaq's poor performance and weakness across secondary battery, entertainment, and gaming sectors."

The won-dollar exchange rate rose for the fourth consecutive trading day. In the Seoul foreign exchange market, the Korean won traded at 1,324.2 won per dollar, up 2.0 won from the previous day's closing price. During the session, it reached 1,329.0 won, setting a new high. Foreign investors led the index decline by net selling. In the securities market, foreigners sold 326.4 billion won worth of stocks, maintaining a selling bias for two consecutive days, and in the KOSDAQ market, they net sold 174.8 billion won, marking five consecutive days of net selling.

With increased market volatility due to tightening concerns and negative factors, market caution is expected to intensify further. This is because a series of major U.S. economic indicators that will influence the Fed's interest rate decisions are scheduled for release through next week.

The February employment report is scheduled for release immediately. Since the January employment report surprise triggered renewed tightening concerns, the market is on high alert. Researcher Kim said, "Although the weekly initial jobless claims released the previous day showed an increase, surpassing 200,000 for the first time in eight weeks, the level remains low. In the employment report released today, it is important to closely watch how the nonfarm payrolls compare to market expectations and whether the growth rate of average hourly wages slows."

Currently, Wall Street expects nonfarm payrolls to increase by 225,000 in February, with the unemployment rate at 3.4%. This is a significant decrease from the 517,000 recorded last month. However, if the indicators exceed market expectations, tightening concerns are expected to intensify further.

Can February Economic Indicators Ease Tightening Concerns?

The Fed's data-dependent stance is being pointed out as a factor that is increasing market volatility.

During congressional testimony on the 7th and 8th, Fed Chair Jerome Powell emphasized the importance of economic indicators. Powell stated, "The level of the March rate hike has not been decided," adding, "It is necessary to review all inflation indicators, including the employment report, Consumer Price Index (CPI), and Producer Price Index (PPI)."

Yujun Choi, a researcher at Shinhan Investment Corp., said, "In his congressional testimony on the 7th and 8th, Fed Chair Jerome Powell mentioned the possibility of increasing the pace of rate hikes and the final rate level if inflation indicators are strong, emphasizing a data-dependent approach. As a result, the financial market is pricing in a high possibility of a 50 basis point (1bp=0.01 percentage point) hike at the March Federal Open Market Committee (FOMC) meeting, but the ultimate size of the March hike depends on the February employment and inflation data."

Suuk Hwang, a researcher at Meritz Securities, said, "The recent increase in monetary policy volatility is due to the Fed's emphasis on data. Therefore, every time data is released, expectations fluctuate, and the market's direction reacts to these policy expectation shifts, making it important whether key economic indicators exceed or fall short of market expectations."

There are also forecasts that the indicators to be released through next week will appear in a way that reverses expectations of tightening. Researcher Hwang explained, "From a broad perspective, ahead of the March FOMC, the major indicators to be released starting tonight are expected to reverse the tightening expectations that have been building since February. Regarding employment, even if the change in nonfarm payrolls slightly exceeds market expectations, it will be about half the level of the previous month. The inflation concerns highlighted in February are due to underlying price pressures from strong consumption, which is likely a temporary effect from tax benefits, so inflation worries driven by consumption will also ease."

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