[Good Morning Stock Market] Rate Cut This Year Drifts Away?..."KOSPI Correction Expected"

New York Stock Market Closes Lower Across the Board
US March Layoffs Plunge 0.7% Year-on-Year
TSMC Earthquake Halts Part of Production Line
Domestic Semiconductor Expected to Gain Reflective Benefits

Neel Kashkari, President of the Minneapolis Federal Reserve

On the 5th, the Korean stock market is expected to undergo a correction. This is due to remarks by a U.S. Federal Reserve (Fed) official stating that there may be no pivot (direction change) within the year. As a result, U.S. stock markets all closed lower.

On the 4th (local time), the Dow Jones Industrial Average closed at 38,596.98, down 530.16 points (1.35%) from the previous trading day. The S&P 500 index fell 64.28 points (1.23%) to close at 5,147.21. The Nasdaq index dropped 228.38 points (1.4%) to finish at 16,049.08.

Today, the Korean stock market is expected to be influenced by comments from Neel Kashkari, President of the Federal Reserve Bank of Minneapolis. At an online event hosted by the investment magazine "Pensions & Investments" (P&I), Kashkari said, "If inflation continues to hover, we inevitably have to question whether there is a need to cut interest rates."

This is interpreted as a clear indication that if the inflation slowdown stalls, the Fed has no reason to cut interest rates within the year. Raphael Bostic, another Fed official, also stated that there may be only one rate cut this year, showing that Fed officials are cautious about recent oil price increases and the resurgence of inflation.

[Image source=Yonhap News]

Meanwhile, U.S. March layoffs dropped sharply to 0.7% year-over-year (compared to 8.8% the previous month). Continuing claims for unemployment benefits also fell short of expectations, increasing concerns about a slowing employment trajectory. The upcoming March nonfarm payroll forecast is 215,000 jobs (previous month 275,000), with the average hourly wage growth at 0.3% month-over-month (previous month 0.1%).

Ji-hyun Kim, a researcher at Kiwoom Securities, analyzed, "Due to heightened sensitivity to economic indicators and Fed officials' remarks, as well as inflation concerns driven by rising oil prices and China's economic rebound, if employment growth continues as in January and February, expectations for rate cuts could be reversed, leading to further corrections."

Considering this, there is a possibility of a correction in the Korean stock market as well. However, optimism related to the semiconductor sector remains valid, so the index's downside is expected to be supported. This is because TSMC halted operations on some production lines due to an earthquake. Some factory damage caused wafer damage, with losses estimated at about 60 million USD (approximately 80.9 billion KRW). It has been confirmed that key equipment such as extreme ultraviolet (EUV) lithography machines were not damaged. While there is no long-term impact on supply, semiconductor manufacturers may raise memory prices during the second-quarter price negotiations.

Researcher Kim stated, "Although the production disruption issue will cause short-term corrections in domestic semiconductor stocks, the need to reduce dependence on Taiwanese semiconductors, which hold a 60% share of the foundry market, is becoming more prominent," adding, "In the long term, domestic semiconductor companies are expected to receive a positive spillover effect."

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