As the Jacksonville meeting hosted by the US Federal Reserve approaches, fears of tapering are looming in the New York Stock Exchange. International oil prices, dollar exchange rates, and market prices of cryptocurrencies such as Bitcoin, Ethereum, and Dogecoin are also affected by the tapering. Bitcoin is showing a rather large rise in return due to tapering, which has made it unstable.
According to the New York Stock Exchange on the 23rd, Federal Reserve Chairman Jerome Powell will give a speech on ‘economic outlook’ at the Jackson Hole Symposium this week. Chairman Powell’s speech was set for 10 a.m. on the 27th. The speech will start at 11 pm on the 27th in Korea time. It is noteworthy whether Chairman Jerome Powell will give hints about normalization of monetary policy, such as tapering of asset purchases, in this speech. According to the minutes of the Federal Open Market Committee, or FOMC, most senior Fed officials believe it is appropriate to start tapering. When the minutes were released, the Nasdaq Dow fell sharply. Alibaba, Tesla, Microsoft, JP Morgan Chase Bank of America, Kakao Bank, Coupang, Home Depot, Costco, Walmart, Target, Apple, and Amazon. International oil price, cryptocurrency, dollar exchange rate, Ethereum, Dogecoin, is also shaking.
The KOSPI was pushed to the 3060 mark by the National Pension Service and foreigners’ ‘Sell Korea’. The domestic stock market is showing a sluggish flow due to concerns about early tapering. The expected band for the KOSPI this week is 3020-3180. Interest in whether or not to taper is being gathered at the ‘Jackson Hall Meeting’ held in the United States from the 26th to the 28th. The Jackson Hole Meeting is an academic discussion on economic and monetary policy in which the US Federal Reserve and central bank governors of 40 countries participate. If it is said at this meeting that tapering is imminent, the possibility of tapering within the year will increase and market volatility may increase. In the New York Stock Exchange, the likelihood of tapering remarks appearing is low.
In Korea, the Monetary Policy Committee of the Bank of Korea will be held on the 26th. Securities analysts are paying attention to the BOK’s attempt to raise the base rate. As concerns about the re-spreading of COVID-19 cannot be ignored, the opinion of a freeze is notoriously difficult. The argument for an interest rate hike is not uncommon. The key rationale for the increase in the long-term interest rate is to respond to the deepening financial imbalances such as the strengthening of housing prices. If the Monetary Policy Committee raises interest rates this time, it is necessary to remain open to the possibility of further hikes within the term of Governor Lee Ju-yeol, such as in November of this year or in the first quarter of next year. Interest rate rise beneficiaries and economically sensitive stocks are attracting attention.
The New York Stock Exchange is expected to move cautiously ahead of the Jackson Hole Symposium this week. Chairman Powell signaled at the Jackson Hole meeting to announce tapering, a cutback to the Fed’s asset purchase program, followed by a formal tapering plan announced at the September meeting. The actual start of the tapering is expected at the end of this year or early next year. The timing of the tapering could come sooner than expected, as most of the members of the Federal Open Market Committee (FOMC) meeting minutes released by the Fed in July said it might be appropriate to start tapering within the year. Bank of America (BOA) has advanced the tapering start time from January next year to November of this year, and ING has also moved it up to October. Dallas Federal Reserve Bank President Robert Kaplan, a leading hawk within the Fed, is calling for a tapering start in October. Although there is a possibility that the New York stock market will continue to respond to the tapering issue, many experts predict that a ‘tightening seizure (taper tentrum)’ like the past will not occur. I believe the Fed has already given the market enough advance signal to offset the shock.
Chairman Powell is expected to comment on the economic recovery after the COVID-19 pandemic in his Jackson Hole speech. Chairman Powell’s diagnosis of the spread of delta mutations is also noteworthy. If the delta mutation significantly slows the indicator and darkens the earnings outlook, this could also be an excuse for a correction. This Jackson Hole Symposium will be held online due to the delta mutation. Most of the Fed’s members expect to see “significant further progress” in the tapering standards of employment and prices within the year, but they cite the spread of delta mutations as the only obstacle to meeting those standards. It is possible that Chairman Powell will give hints about tapering at this meeting. Still, this is highly likely to be the level shown in the July FOMC minutes. In other words, the majority of committee members reaffirm that the US economy may achieve significant further progress within the year and begin to taper within this year, and they see uncertainty due to delta variation as a risk factor.
The U.S. Food and Drug Administration (FDA) has set the 23rd as the approval time for Pfizer-BioNtech’s COVID-19 vaccine. The news is circulating that the FDA is in the process of finalizing the full approval of the Pfizer vaccine. If the Pfizer vaccine is fully approved, it will be possible to demonstrate the safety and effectiveness of the Pfizer vaccine to Americans who have not yet been vaccinated. In this case, it is expected that the vaccination rate will be accelerated. Originally, the FDA had planned to complete the approval before or after Labor Day on September 6.
Economic indicators the New York Stock Exchange is paying attention to this week include the housing indicator, the weekly unemployment indicator, the revised second-quarter gross domestic product (GDP) and the personal consumption expenditure (PCE) price index. The preliminary GDP figure recorded an annual rate of 6.5%, which was slower than expected. The core PCE price index in June rose 3.5% year-on-year to a new high in 30 years. The core PCE price index for July is expected to rise 3.6% YoY.
New York Stock Exchange Indicator Release and Speech Schedule
August 23 = Chicago Federal Reserve’s National Activity Index (CFNAI), Existing Home Sales for July
August 24 = Richmond Fed Manufacturing Index, New Home Sales, Best Buy, Nordstrom Earnings Announced
August 25 = Durable Goods Order Salesforce, Snowflake Performance
Aug. 26 = Number of new unemployment insurance claims, Q2 corporate earnings (reserved) Q2 GDP (adjusted value) Kansas City Fed Manufacturing Activity Index, Jackson Hole Symposium (~28 days) HP, Dell, Peloton Performance
August 27 = July Personal Consumption Expenditure (PCE) and Personal Income, Balance of Trade in Goods, University of Michigan Consumer Attitude Index (Fixed), Fed Chair Jerome Powell Speech at Jackson Hole Symposium
Last week, New York stocks rebounded as tech stocks rose despite the spread of delta mutations. On the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 35,120.08, up 225.96 points (0.65%) from the previous day. The Standard & Poor’s 500 Index rose 35.87 points (0.81%) to close at 4,441.67, and the Nasdaq Index, centered on technology stocks, closed at 14,714.66, up 172.87 points (1.19%) from the battlefield. Investor sentiment was dampened as the spread of the delta mutation raised the possibility that the Fed’s tapering rate could be adjusted. Dallas Fed President Kaplan Dallas told Fox Business that if the delta mutation slows demand and negatively affects GDP growth, it will be a quick fix. You mentioned that comments that requested tapering can be adjusted. Apple is said to have delayed its return to office to January next year due to the spread of the delta mutation. Nvidia and Microsoft rose. Apple and Alphabet A also rose. Tesla rose about 1% as it announced plans to unveil a new supercomputer chip and introduce a robot with a human-like appearance. According to the Chicago Mercantile Exchange (CME) FedWatch report, the Federal Funds (FF) interest rate futures market reflected a 5.7% chance of a 25bp rate hike in March next year. We also factored in the possibility of a 50bp hike at 0.1%. On the Chicago Board Options Exchange (CBOE), the volatility index (VIX) traded at 18.56, down 3.11 points (14.35%) from the battlefield.
Last weekend, the KOSPI closed at 3,060.51. The KOSPI fell below the 3,100 level for the first time in four months, and the KOSDAQ index fell below the 1,000 level for the first time in two months. Samsung[005930]and SK hynix[000660]shares plummeted on the prospect of a decline in DRAM prices. The won-dollar exchange rate closed at 1,179.6 won, the highest in 11 months. Some analysts say that the decline in the domestic stock market is excessive. The 12-month forward price/earnings ratio (PER) of the KOSPI is 10.9x, which is a rock-bottom of the fundamentals and is below 11.8x at the end of 2019, before the COVID-19 pandemic. The current stock market correction is the basis for an extreme undershooting nature based on psychological and supply-demand irritability, not fundamentals.
Pension funds, such as the National Pension, Samsung Electronics[005930]and SK hynix[000660]Sell a lot of Kakao Bank[323410](Kabin) and Krafton[259960]bought a lot of Samsung Electronics was the stock that net sold the most on the stock market until the 20th of this month. The net selling amount was 326.3 billion won. During this period, the pension fund is the second largest investor in the Samsung Electronics net sales following foreigners who net sold 6.1 trillion won of Samsung Electronics. The pension fund is SK Hynix (152 billion won) and Hyundai Motor[005380](118.2 billion won) also net sold more than 100 billion won each. The stocks that the pension fund net sold the most in August were POSCO.[005490](70 billion won), Korea Shipbuilding & Marine Engineering[009540](62.9 billion won), Samsung Electronics Woo[005935](61.8 billion won), Samsung Electro-Mechanics[009150](61.7 billion won) and Naver (58 billion won). The pension fund, which removed Samsung Electronics and SK Hynix from the ‘barn’, contains Carbin and Krafton. In addition to Cabin and Krafton, the stocks that the pension fund net bought the most in August were Samsung Biologics (79.9 billion won) and Hive.[352820](52.4 billion won), SK chemicals[285130](48.9 billion won), HMM[011200](30.2 billion won), SK IE Technology[361610](27.5 billion won), E-Mart[139480](24 billion won), etc.
Although the domestic and foreign asset markets were engulfed in anxiety by the news of the US Federal Reserve’s tapering (reduction in asset purchases), the cryptocurrency market is rather strong, trying to break through the $50,000 mark, which is considered a psychological resistance level. Following the launch of ‘Bitcoin Fund’ by investment banks in the New York Stock Exchange, the news that Coinbase, the largest cryptocurrency exchange in the United States, started to purchase large amounts of cryptocurrency to revitalize trading, worked positively. Upbit, the largest cryptocurrency exchange in Korea, submitted a virtual asset business report to the financial authorities, suggesting the possibility of entering the system.
The cryptocurrency market, which has undergone a correction, has recently shown a clear recovery trend. It is analyzed that the short-term rally was influenced by the demand for low prices following the short-term decline and the recent favorable news in the global market. Coindesk announced that Coinbase, the largest cryptocurrency exchange in the United States, has purchased $500 million worth of cryptocurrencies to increase cryptocurrency trading due to the recent surge in bitcoin. JPMorgan and Wells Fargo have announced that they have filed applications with the Securities and Exchange Commission (SEC) to launch a bitcoin fund. Analysts say that the heightened anxiety in the asset market due to the US tapering movement could also affect the cryptocurrency market. In addition to the recent economic uncertainty caused by the re-spread of COVID-19, the preference for safe assets has strengthened. Bitcoin, which has a limited number, is being classified as a safe asset in the tapering phase.
Daeho Kim, Director, Global Economic Research Institute tiger8280@g-enews.com
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