[Weekly Market Outlook] US CPI and Minutes Key... Earnings Season Also a Variable

March CPI Expected to Rise 0.4% MoM
Up 5.1% YoY...Positive if Forecast Met
Rate Cut Signals in Minutes Are Key
Semiconductor Profit Outlook Downgraded

[Image source=Yonhap News]

This week (10th-14th), the Korean stock market is expected to remain cautious ahead of the release of the U.S. March Consumer Price Index (CPI) on the 12th and the Federal Open Market Committee (FOMC) meeting minutes.

According to the Korea Exchange on the 9th, last week the KOSPI closed at 2,490.41, up 13.55 points (0.55%) from the previous week (2,476.86). Although it fell 1.44% on the 6th amid growing concerns about a U.S. economic recession, it recovered 1.27% by the end of the week, resulting in a weekly gain.

The market’s biggest focus is the CPI release. According to a survey by The Wall Street Journal (WSJ) of economists, the March CPI is expected to rise 0.4% month-over-month. Year-over-year, it is forecasted to increase by 5.1%. These figures represent a slowdown compared to last month’s +0.5% and +6.0%, respectively.

If the actual CPI aligns with expectations, the Federal Reserve (Fed) is anticipated to raise the benchmark interest rate by only 0.25 percentage points at the May FOMC meeting. Although employment and inflation remain strong, pressure for further rate hikes is expected to weaken.

[Image source=Reuters Yonhap News]

The March FOMC minutes are also an important gauge. In the March FOMC, the Fed raised the benchmark interest rate by 0.25 percentage points and maintained the year-end rate forecast at 5.00%?5.25%.

Although the Fed previously stated there would be no rate cuts this year, the market expects rate cuts within the year. This is due to latent concerns and rising recession fears following the collapse of Silicon Valley Bank (SVB).

The start of the earnings season this week is also expected to impact the stock market. Over the past two weeks, the KOSPI’s first-quarter operating profit consensus has fallen 2.8%, from 34.7 trillion won to 33.8 trillion won.

Industries with significant upward revisions in profit forecasts include machinery (+15.8%), consumer staples (+9.5%), and IT home appliances (+5.1%). Conversely, industries with notable downward revisions include hotels & leisure (-5.2%), steel (-7.7%), and shipbuilding (-12.4%).

The semiconductor sector also saw an increased deficit forecast (-2.2 trillion won → -2.8 trillion won). Quarterly operating profit forecasts are expected to rise stepwise from a low of 33.8 trillion won in Q1 to 36.8 trillion won in Q2 and 47.7 trillion won in Q3.

Kim Young-hwan, a researcher at NH Investment & Securities, said, "The most important event next week is the U.S. March CPI release, with the Cleveland Fed’s forecast at +5.22%. If the actual figure meets expectations, it is likely to act as a positive factor for the stock market."

He added, "At the individual stock level, the earnings season is important. Rather than the quarterly results themselves, whether companies provide guidance that raises expectations for future earnings improvements will act as a momentum driver for stock prices."

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