The U.S. Federal Reserve cut its benchmark interest rate last week as experts had expected, boosting hopes for a "Santa rally." But it remains to be seen whether the year-end market can keep its upward momentum.
This week (Dec. 15–19), major U.S. economic indicators will be released one after another, and the Bank of Japan (BOJ) is scheduled to decide its benchmark rate. With the debate over an artificial intelligence (AI) bubble simmering down, Micron's earnings are also in focus.
This week also brings a string of major events, including the release of U.S. employment and inflation data and rate decisions by major Central Banks such as the BOJ. On top of that, Micron's earnings, seen as a "weathervane" for memory semiconductors, are drawing investors' attention.
Last week (Dec. 8–12), the domestic stock market rebounded on the back of a tailwind from U.S. rate cuts. The KOSPI started at 4,109.25 and closed at 4,167.16 on the 12th, up 1.41%. During the same period, the KOSDAQ rose 0.95% and finished trading around 937.
The biggest question for investors is whether the rally can continue this week. U.S. major economic indicators that were delayed by the government shutdown will be released in a concentrated batch this week. In particular, the November nonfarm payrolls (NFP), due on the night of the 16th (Korea time), is a key variable. If the market consensus of about 50,000 new jobs is met, expectations for additional easing by the Fed could gain more traction.
Then on the 18th, the November consumer price index (CPI) will be released, followed by the November personal consumption expenditures (PCE) price index, the Fed's preferred inflation gauge, on the 19th.
Monetary policy decisions by major Central Banks convening right after the U.S. rate cut are also expected to heighten market volatility. According to Mirae Asset Securities, the Bank of England (BOE) is seen favoring a rate cut, the European Central Bank (ECB) a hold, and the Bank of Japan (BOJ) a rate hike. The BOE and ECB will announce results on the 18th, and the BOJ on the 19th.
Attention is particularly focused on the BOJ's currency policy. The BOJ is set to decide the benchmark rate on the 19th, after Governor Kazuo Ueda already hinted at the possibility of a hike. As yen funding expense rises, concerns are growing over an "yen carry trade" unwind that could spur capital outflows from global markets.
Woo Hye-young, a researcher at LS Securities, said, "The market has largely priced in the possibility that the BOJ will raise rates further, but uncertainty remains over the pace of normalization afterward," adding, "Given the rigid labor market, the prolonged weakness of the yen, and inflationary pressures, there is ample justification and need for additional hikes."
On the 18th, Micron's earnings, the "weathervane for memory," will also be released. Depending on Micron's results, expectations are rising that the justification for artificial intelligence (AI) semiconductor valuation (corporate value assessment) will be reaffirmed. It will also offer a read on the business conditions of Samsung Electronics and SK hynix, whose business structures are similar to Micron's.
There is also speculation that U.S. President Donald Trump could make a "surprise decision." Daishin Securities Co.'s research center said, "Given U.S. President Donald Trump's emphasis on political events, there is a possibility he will nominate the next Fed chair around Christmas," adding, "another reason a year-end Santa rally could arrive."