This week (the 15th to the 19th), the domestic stock market is expected to be affected by the possibility of an end to the war between the United States and Iran and the first Federal Open Market Committee (FOMC) meeting since new Federal Reserve (Fed) Chair Kevin Warsh took office. In particular, with the likelihood of a U.S. rate hike increasing, the direction of global stock markets is expected to be determined by the message Warsh delivers.
The KOSPI index experienced sharp swings last week (the 8th to the 12th), undergoing a correction from the previous week. On the 8th, the KOSPI index fell more than 8% and a circuit breaker was triggered due to strong U.S. employment data and the shock from Broadcom's earnings.
After fluctuating for several days and staying in the 7,700 range, the KOSPI index rose 4% on the 12th on news that a U.S.-Iran end-of-war deal was imminent, successfully reclaiming the 8,100 level.
The United States and Iran could achieve meaningful progress in end-of-war talks over the weekend. But differences between the two countries are still evident. The United States said a signing ceremony for the end of the war could be held in Europe over the weekend. Iran, by contrast, said there would not be a signing on the 14th (local time) and that even if the war ends, it would sign remotely.
After the end-of-war talks, investors' attention is expected to focus on the FOMC scheduled for the 18th. Lee Jae-won of Yuanta Securities Korea said, "The key is the dot plot that shows the Federal Reserve Commissioners' outlook for future rates," adding, "The crux is whether the outlook for cuts within the year disappears and how much some members leave the door open to a hike."
In the securities industry, there is also analysis that the June FOMC outcome could be a major turning point for the market. Lee Kyung-min of Daishin Securities said, "An upward revision of the dot plot is inevitable, but if it signals rate holds for this year and next, it could actually be a surprise momentum for the market," adding, "Even if it signals one rate hike each this year and next, instead of burdening the market, it could bring relief that the worst has passed."
This meeting is the first FOMC chaired by new Chair Warsh, and the key is what message Warsh will deliver at his first press conference.
The researcher analyzed, "Considering that this is a board member nominated by President Trump and a debut stage, there is a high likelihood of expressing a relatively dovish stance (preference for accommodative monetary policy)," adding, "The more hawkish the dot plot or the statement, the more dovish the new Chair Warsh's press conference is expected to be."
There are also concerns that if the Fed delivers a message that does not rule out a rate hike, market volatility could increase. Na Jeong-hwan of NH Investment & Securities explained, "The possibility of extremely hawkish remarks is low, but even so, if a message emerges that does not rule out a rate hike, concerns about tightening will inevitably increase stock price volatility."
Before that, on the 16th, the Bank of Japan (BOJ) monetary policy meeting is scheduled. The BOJ is also currently expected to decide on an additional rate hike.