[Good Morning Stock Market] US Inflation Slowdown Signals End of Tightening... "KOSPI Starts Higher"

June Consumer Price Index Followed by Producer Price Index Slowdown
"KOSPI Starts Up 0.5~0.8% Higher"

On the 13th (local time), the U.S. stock market closed higher as the June Producer Price Index (PPI) fell short of expectations. The Dow Jones Industrial Average rose 47.71 points (0.14%) to close at 34,395.14, while the large-cap S&P 500 index ended the day up 37.88 points (0.85%) at 4,510.04. The tech-heavy Nasdaq index finished 219.61 points (1.58%) higher at 14,138.57.

Image source=Reuters·Yonhap News

According to the U.S. Department of Labor, the June PPI increased by 0.1% year-over-year, marking the smallest rise since August 2020. This was below the forecast of 0.4% and down from May's 0.9% increase. On a month-over-month basis, the PPI rose by only 0.1%, falling short of the market expectation of 0.2%. The core PPI, which excludes volatile energy, food, and trade services, increased 2.6% year-over-year and 0.1% month-over-month.

The day before, the June Consumer Price Index (CPI) rose 3.0% year-over-year, also below market expectations. With both CPI and PPI indicating a slowdown in inflation, there are growing claims that the Federal Reserve's monetary tightening policy is nearing its end. The market largely expects a rate hike in July followed by a pause in September. Although the Fed has hinted at two additional hikes this year, the outlook that tightening could end sooner is gaining traction.

Additionally, news emerged that James Bullard, president of the Federal Reserve Bank of St. Louis and a leading hawkish member of the Fed, will resign next month. Investors are closely watching how the departure of this key figure, who led aggressive monetary policy, might impact future policy decisions.

However, weekly U.S. initial jobless claims showed a decline, suggesting the labor market remains robust. For the week ending on the 8th, new jobless claims totaled 237,000, down 12,000 from the previous week.

On the 14th, the domestic stock market is expected to open higher. Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "The KOSPI is expected to start up around 0.5% to 0.8%. The significantly reduced concerns about Fed tightening clearly create a favorable investment environment for foreigners, who are key players in domestic market demand."

He added, "Although foreigners have maintained a net buying trend for three consecutive trading days this week, the domestic market, which has reached technical resistance, has not gained strong momentum to break through decisively. This is because the inflow is more centered on futures rather than spot trading. Ultimately, for the domestic market to show strong performance like the U.S. by hitting new highs throughout the year, strong net buying focused on spot trading by foreigners is necessary, along with a more balanced distribution of demand rather than almost all-in on Samsung Electronics."

Han Ji-young, a researcher at Kiwoom Securities, said, "Coupled with the resignation news of Bullard, a prominent hawkish figure within the Fed, expectations are again forming that the Fed's rate hike cycle will end after July. Except for the upcoming real economy data releases from China and the U.S. next week, there are no major macro events until the July FOMC, so an earnings-driven market environment for U.S. companies, including big tech, is expected."

Han also noted, "Supported by the Nasdaq hitting new highs, Nvidia's strength, and the sharp drop in the offshore won-dollar exchange rate, the domestic market is expected to start higher. By sector, attention should be paid to undervalued domestic consumption stocks, construction, and petroleum and chemical industries."

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