This week (the 7th–11th), Korea's stock market is expected to be heavily influenced by whether U.S. Government Bonds yields stabilize. As the U.S. Treasury expands the size of its long-term bond buyback, inflation indicators that will shape the Federal Reserve's policy rate path will also be released in succession.
On Aug. 31–Sept. 4, Korea's stock market weakened on unstable macroeconomic variables. Samsung Electronics and SK hynix continued to buy back their own shares, but rising U.S. Government Bonds yields and tensions in the Middle East weighed on the market.
With the United States resuming airstrikes on Iran for the first time in a month and pushing international oil prices above $90 per barrel, inflation concerns have flared again. In response, the U.S. 10-year Government Bonds yield rose to as high as 4.8%, the highest since Jan. 2025, adding pressure to Korea's stock market.
However, ahead of the weekend, dovish (favoring monetary easing) remarks by senior Federal Reserve officials partially eased the burden of high rates. Christopher Waller, a Federal Reserve governor, noted that if upcoming inflation data confirm easing price pressures, he would be inclined to support holding the policy rate steady.
According to the Chicago Mercantile Exchange (CME) FedWatch, the chance of the Fed holding rates in September rose to 49.5% on the 3rd from 36.8% on the 2nd.
Market focus this week is also expected to converge on the U.S. rate trajectory. Lee Jae-won of Yuanta Securities Korea said, "A slowdown in jobs and price indicators, along with the Treasury's efforts to stabilize long-term bond supply and demand, are factors that could lower rates."
First, on the 9th, the U.S. Treasury will expand the size of its long-term Government Bonds buyback. The per-operation purchase size will be increased from $2 billion to $4 billion. When the Treasury buys long-term Government Bonds, the amount of long-dated paper circulating in the market decreases, which can drive up Government Bonds prices and push down long-term yields.
On the 10th, the U.S. August Producer Price Index (PPI) will be released. The market expects PPI to rise 5.2% from a year earlier. A surge in semiconductor prices has fanned prices for communications and electronic equipment.
However, the market does not see a high likelihood that producer prices will spill over to consumer prices.
On the 11th, the U.S. August Consumer Price Index (CPI) will be published. The Federal Reserve Bank of Cleveland estimates CPI will rise 3.4% from a year earlier. If CPI tops market expectations, inflation worries could flare again, potentially lifting U.S. Government Bonds yields and adding downward pressure on stocks.
The same day, preliminary University of Michigan 1-year and 5–10-year inflation expectations for September will also be released. Inflation expectations show how high consumers expect future inflation to be. If higher oil prices also spur inflation expectations, the Fed's tightening stance could come back into focus.
At the market's lower bound, share buybacks by Samsung Electronics and SK hynix are expected to act as a support. The two companies plan to purchase a combined roughly 55 trillion won of their own shares by mid-November. According to Shinhan Investment & Securities, their additional buying capacity is about 38.3 trillion won. If they buy about 1.6 trillion won per day, that would allow additional purchases for 24 trading days.
Meanwhile, on the 10th, the so-called "quadruple witching day," when KOSPI 200 futures and options expire simultaneously, is scheduled and could increase volatility. Na Jeong-hwan of NH Investment & Securities said, "As of one week before expiry, open interest in the front-month is clearly lower than just before the March and June expirations, and much of the options hedging has been unwound," adding, "Even if funds of the same size flow in, stock price volatility could increase."