June is drawing keen attention

 The KOSPI started the week with an unstable appearance enough to threaten the collapse of the 2,500-point level. The KOSPI has also experienced a 74.78 point (2.80%) decline over the past week. The sluggish trend continued as it increased its fall further on the 13th, the first day of the week. On the same day, the KOSPI opened at 2550.21, down 45.66 points (1.76%) from the previous day, and maintained a decline of around 3% from the previous day.

 

Last week, stock prices fell, which is also rare in the New York Stock Exchange. The Dow Jones 30 Industrial Average fell 4.58 percent and the Standard & Poor's and Nasdaq fell 5 percent.

 

It was also foreigners who led the KOSPI's fall. Foreigners, who have already sold more than 2 trillion won in stocks this month until last week, strengthened their selling trend on the 13th. The biggest factor that encouraged their stock selling was the U.S. consumer price index for May released on the 10th (local time).

The U.S. Department of Labor announced that the Consumer Price Index (CPI) rose 8.6% in May from a year ago. The core CPI increase rate was also found to be 6%. All of them exceeded market expectations. In particular, most of the daily necessities prices in the United States showed a double-digit increase.

 

The market mood cooled sharply at unexpected inflation rates. It was also due to the disappearance of expectations that the Federal Reserve (Fed) would temporarily stop raising interest rates by the fall as trust in the theory of price peaks collapsed.

 

The market's outlook for the Fed's fall moves has changed in the opposite direction. Before the announcement of consumer prices in May, market experts generally expected that the Fed would take a big step in June and July, followed by a 0.5 percentage point increase in key interest rates, and then briefly try to pick a hop in September.

 

However, the atmosphere turned around as indicators confirmed that inflation was stronger than expected. Concerns have begun to spread at the Federal Open Market Committee (FOMC) meeting to be held from the 14th to the 15th that the Fed may take a giant step (increase the key interest rate by 0.75 percentage points at a time) to curb released prices. Furthermore, concerns have grown that the rate hike march will continue at the July and September meetings.

 

Barclays Investment Bank and others raised the possibility that the Fed will take a giant step at the FOMC this week. However, public opinion is still focused on the 0.5 percentage point increase. Goldman Sachs and JP Morgan are supporting a 0.5 percentage point increase.

 

However, Goldman Sachs predicted that the Fed would raise its key interest rate by 0.5 percentage points in June, July and September. If this outlook fits, the Fed will take four big steps in a row. The Fed took a big step in May after raising its key interest rate by 0.25 percentage points in March.

 

High prices are raising concerns that the possibility of a recession in the U.S. economy will increase. This is because consumption has shrunk due to inflation, which is the first time in more than 40 years, and as a result, the U.S. economy is more likely to enter a recession. This is also a factor that negatively affects the stock market.

 

When the U.S. price index was released in May, the won/dollar exchange rate also rose sharply. This is also linked to the prospect that the Fed will tighten its tightening reins stronger. The depreciation of the won is considered one of the factors that stimulate the outflow of foreign capital from the local stock market.

 

The current stock market atmosphere is expected to continue until the results of this week's FOMC meeting are released. Depending on the Fed's statement or Chairman Jerome Powell's remarks, the investment atmosphere may cool down further.

 

It is noteworthy that Chairman Powell will send a message on the 15th regarding the FOMC meeting in September. If the Fed hints at the possibility of continuing more than a big step in September and beyond, the market could shake again.

 

The outlook for the U.S. economy, which the Fed will release on the same day, is also a factor worth paying attention to. Dotplots to be included in the forecast data are also expected to attract investors. The dot chart is a chart that shows the level of future U.S. benchmark interest rates expected by each Fed member. If this contains a higher outlook for the benchmark interest rate than the dotplot announced in March, market disappointment will inevitably grow.

 

Meanwhile, the KOSPI continued its sluggish trend on the 13th, showing a drop of around 3 percent throughout the day. The KOSPI, which started trading with 45.66 points (1.76 percent) lower than the previous day, has since grown its fall and is threatened by the 2,500-point level several times. The direct reason was the large withdrawal of foreign funds due to the collapse of expectations for a slowdown in inflation in the United States and the resurgence of economic recession issues.

 

The KOSPI eventually closed at 2504.51, down 91.36 points (3.52%) from the previous day.