It was a week when the KOSPI index, which had set a record high, lost steam. Expectations for rate cuts eased, and the rupture in U.S.-Korea trade talks had a big impact. Federal Reserve (Fed) Chair Jerome Powell's comment that "stock prices are fairly highly valued" also weighed on the market.
After wavering in the upper 3,400s, the KOSPI index began to fall on 24th and plunged 2.45% (85.06 points) on 26th in a single day. It also lost the 3,400 level for the first time in 10 trading days.
This week (Sept. 29–Oct. 2), before the long Chuseok holiday begins, key U.S. economic indicators are also expected to draw attention. As global markets have become more sensitive to bad news, the results of economic indicators could be a key variable for expectations of rate cuts.
On the night of 26th, the U.S. released the August personal consumption expenditures (PCE), a key inflation gauge. The August PCE price index rose 2.7% from a year earlier. Lee Kyung-min, a DAISHIN SECURITIES researcher, said, "If we confirm inflation coming in higher than expected, it could lead to a pullback in medium- to long-term rate-cut expectations."
On Oct. 1, the September U.S. Automatic Data Processing (ADP) private payrolls report is scheduled for release. With markets closed from 3rd due to the National Foundation Day holiday, this indicator allows a preemptive read on the U.S. economy and employment. The market expects 50,000, down from the previous month's 54,000.
Lee Kyung-min, a DAISHIN SECURITIES researcher, explained, "A larger-than-expected weak jobs number could stoke growth slowdown fears, while a solid jobs print could spur a scenario of delayed rate cuts."
The September U.S. Institute for Supply Management (ISM) manufacturing index is also set for release. Bloomberg expects the ISM manufacturing index at 49.2 points (p). If this index is weak, it could lend support to the possibility of rate cuts.
On the same day, Korea's September trade figures will also be released. With concerns rising about a fourth-quarter export slowdown, some say attention should also be paid to the trajectory of the export indicators.
On Oct. 3, the first day of the holiday, the September U.S. nonfarm payrolls report will be released. The market expects about 43,000 for nonfarm payrolls. That would be a slight increase from the previous month's 22,000.
Even if nonfarm payrolls increase from the previous month, if the gain remains in the low single digits and the job openings rate continues to fall, some interpret that as evidence confirming weakening demand in the labor market.
Kim Yu-mi, a Kiwoom Securities researcher, analyzed, "If the indicators come in line with the market consensus (forecasts), the Federal Reserve's rate-cut expectations are likely to hold even if the results are somewhat mixed," adding, "If job market weakness persists, year-end rate cuts will still be valid even if other indicators are relatively solid."
Meanwhile, from 29th, China's temporary visa-free entry for group tourists will begin. The policy is set to run through June 30 next year, and attention will be on whether, once implemented, it serves as an upside driver for related sectors such as leisure and lodging.
The start of the U.S. federal government fiscal year on Oct. 1 is also a variable. The budget for the next federal government fiscal year applies from October, but the U.S. Congress has yet to pass next year's budget due to partisan differences. This has raised concerns about a shutdown. However, due to the political burden, some analysts say the likelihood of a shutdown materializing is low and the spillover effects on financial markets would also be limited.