[Good Morning Stock Market] Relief After FOMC Results... "KOSPI Expected to Start Higher"

[Image source=Yonhap News]

On the 2nd, the Korean stock market is expected to start on an upward trend. This is due to Federal Reserve Chairman Jerome Powell's less hawkish (less tightening) remarks at the November Federal Open Market Committee (FOMC) meeting. As a result, the U.S. stock market also closed strong, and external conditions were favorable with declines in the dollar and interest rates.

On the previous day (local time), the U.S. Dow Jones Industrial Average closed at 33,274.58, up 221.71 points (0.67%) from the previous session. The large-cap focused S&P 500 index rose 44.06 points (1.05%) to 4,237.86, and the tech-heavy Nasdaq index increased by 210.23 points (1.64%) to close at 13,061.47.

The reason for the U.S. stock market's unanimous rise was the less hawkish-than-expected FOMC outcome. The Fed kept the benchmark interest rate unchanged at 5.25-5.50% on the 1st (local time), marking the second consecutive pause following September.

The market had already priced in the rate hold, so Chairman Powell's remarks had a significant impact. Powell noted that the recent rise in long-term interest rates has tightened financial conditions, which could increase borrowing costs for businesses and households and thus burden economic activity. Ji-young Han, a researcher at Kiwoom Securities, analyzed, "This suggests that the Fed's optimistic outlook, which does not yet anticipate a recession, may be subject to change."

Another notable point was Powell's mention that the balance between acting too aggressively or too little on tightening is better maintained than before. The recent rise in market interest rates and financial market instability, such as the sharp drop in stock prices, appear to reduce the need for further rate hikes compared to the September FOMC.

Han said, "The less hawkish November FOMC outcome will serve as a catalyst to strengthen the downside rigidity of the stock market for the time being," but added, "However, it is necessary to consider whether the risk appetite that drove the rally in the first half of the year can spread again."

Considering this, the Korean stock market is expected to show an upward trend due to favorable external factors. From an industry perspective, the Philadelphia Semiconductor Index's strength is expected to improve the supply-demand environment for IT sectors such as semiconductors. The Philadelphia Semiconductor Index closed 2.3% higher than the previous day, buoyed by AMD's optimistic data center sales guidance.

However, Korea's October exports, announced the previous day, could be a direct burden. October exports rose 5.1% year-on-year, falling short of the consensus (+6.3%), and the U.S. October ISM Manufacturing PMI (46.7), which affects with a lag, also missed the consensus (49.0).

Nonetheless, considering that the current market is in a "Bad news is good news" phase regarding U.S. data, the recent financial instability along with the slowdown in U.S. economic momentum could be a neutral or better factor for the stock market.

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