This week (Dec. 1–5) is expected to be a volatile one for stocks ahead of the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve on Dec. 9–10, with markets likely to swing widely depending on remarks by Chair Jerome Powell and key economic indicators.
Last week (Nov. 24–28) the domestic stock market remained weak without finding a catalyst for a rebound. The KOSPI started at the 3,800 level on the 24th but failed to break through the 4,000 level, closing at 3,926.59 on the 28th. By contrast, the KOSDAQ, buoyed by expectations of benefits from government policy, recovered the 900 level and closed higher at 912.67.
Attention is focused on whether the FOMC will cut the benchmark rate in December. First, on the 1st (local time), Chair Jerome Powell of the Federal Reserve is scheduled to participate in a Hoover Institution special lecture panel discussion, and remarks there are expected to be an important signal for the rate outlook.
On the Chicago Mercantile Exchange (CME) FedWatch tool, the probability of a 0.25 percentage point cut in December recently rose into the 80% range, but based on recent remarks by Federal Reserve members, there is also talk that opinions could split 6–6 on whether to cut.
Seo Sang-young, a researcher at Mirae Asset Securities, said, "Remarks by Powell on the 1st are expected to be important," adding, "If Federal Reserve members split 6 to 6 in the preliminary discussion, Powell's negotiating ability will become crucial."
On the same day, the Federal Reserve will end quantitative tightening (QT). As a result, the pressure on short-term liquidity will ease, which is expected to act as a positive signal for the market.
In Korea this week, November export-import trends and the final reading of third-quarter GDP will be released. Lee Kyung-min, a researcher at Daishin Securities Co., explained, "If solid exports and economic fundamentals are confirmed, it is expected to create favorable conditions for shifting the recent won-weakness trend and for foreign inflows."
Attention is also on major U.S. economic indicators next week. Releases of employment and consumption indicators are being delayed by the government shutdown, so if the actual data are published, market volatility is likely to increase further.
On the 1st (local time), the November ISM manufacturing index will be released, and on the 3rd (local time), the November ADP private employment index and the November ISM services index will be announced. On the 5th (local time), the September PCE price index is scheduled for release. Among these, the November ADP private employment index and the September PCE price index are expected to be used as key reference indicators.
Yoo Myung-gan, a researcher at Mirae Asset Securities, analyzed, "Inflation is rising relatively moderately and concerns about the labor market persist, so the likelihood of a December FOMC rate cut appears high."
In particular, with the official November employment report delayed, the ADP private employment index is expected to serve as an alternative indicator to gauge U.S. labor conditions.
Regarding the November ADP private employment index, researcher Lee Kyung-min said, "An increase of 20,000, slower than October's 42,000, is expected," adding, "If the actual figure falls short of expectations or turns negative, it would strengthen the case for a rate cut."
Researcher Na Jeong-hwan at NH Investment & Securities also said, "Given the recent trend of declines in weekly ADP employment, the likelihood of a turn toward a more accommodative monetary policy stance appears low."
Meanwhile, in the domestic stock market, the National Assembly continues to discuss the third amendment to the Commercial Act and the plan for separate taxation of dividend income, so it remains necessary to keep an eye on financial holding companies and holding company-related stocks.