PiCK
Fed, BOJ Tightening Week Puts Kospi’s 7,000 Retest to the Test
Summary
- August consumer price index (CPI) and core CPI both topped forecasts, pushing the odds of a 0.25 percentage-point increase in the benchmark interest rate to nearly 90%.
- Elevated long-term U.S. yields and international oil prices could weigh on valuations for growth stocks including AI and semiconductor shares, while also pressuring global risk assets.
- Brokerages say the Kospi 7,000 level will need support from easing oil prices and long-term U.S. yields for the index to extend its rebound.
Forecast Trend Report by Period
Global financial markets are poised for higher volatility next week as major central banks, including the Federal Reserve and the Bank of Japan, deliver policy decisions in quick succession. Concerns about further tightening have resurfaced after U.S. inflation came in stronger than expected, with crude oil and Treasury yields still elevated.
According to the U.S. Labor Department, the consumer price index rose 0.4% in August from the previous month and 3.4% from a year earlier. Core CPI, which excludes food and energy, increased 0.3% on the month, above the market forecast of 0.2%. As a result, the odds of a 0.25 percentage-point rate increase at the Sept. 15-16 Federal Open Market Committee meeting have climbed to nearly 90%.
The market focus is less on whether the Fed raises rates than on the possibility of additional tightening afterward. The FOMC will also release updated economic projections and its dot plot. Another key variable is how much Fed Chair Kevin Warsh keeps the door open to further increases.
Long-term U.S. yields are also a source of pressure. The 10-year Treasury yield recently approached 5% intraday. If long-term yields remain elevated, valuation pressure could build on growth stocks, including AI and semiconductor shares.
The Bank of Japan will hold its monetary policy meeting on Sept. 17-18. Markets are placing high odds on a rate increase to 1.25% from 1.00%. If that happens, concerns over an unwind of the yen carry trade could intensify and weigh on risk assets globally.
Oil prices will also be in focus. Brent crude and West Texas Intermediate have recently climbed to around $100 a barrel. If crude remains high, it could fuel concerns over both U.S. inflation and further policy tightening.
In South Korea's stock market, the key question is whether the Kospi can reclaim the 7,000 level. The Kospi rose above 7,000 on the back of the AI and semiconductor rally, but recently slipped below that mark again as high oil prices and rising rates renewed pressure. Brokerages say the index's rebound will likely gain further traction only if gains in oil prices and long-term U.S. yields ease.
