4100 Recovered KOSPI, Expected to Start Higher Amid Tailwind from New York Stocks [Today's Market Preview]

U.S. stocks closed last week with strength in tech, and domestic markets are also expected to start higher today. However, as the week progresses, major events such as options expiries, the U.S. central bank (Fed) rate decision, and earnings announcements from AI-themed companies are concentrated, so short-term market volatility is expected to widen.

On the 5th, the KOSPI index surged 1.78%, ending the week by recovering the 4100-point level for the first time in 16 trading days. Foreigners and institutions led the rise, net buying KRW 993 billion and KRW 1.153 trillion worth of shares on the Korea Exchange, respectively. In particular, foreigners have shown improved demand, net buying around KRW 2 trillion so far this month.

Later, on the 5th (local time) all three major U.S. indices rose. The Dow Jones Industrial Average closed at 47,954.99 points, up 0.22% from the previous close. The S&P 500 rose 0.19% to 6870.40 points, and the Nasdaq rose 0.31% to 23,578.13 points.

The rise was driven by key inflation data released during the session. The core PCE price index compiled by the U.S. Department of Commerce showed a 0.2% month-on-month increase in September. As a key gauge the Fed references when setting its policy rate rose as expected, it bolstered expectations of a rate cut. The Fed will hold a Federal Open Market Committee (FOMC) meeting to decide the policy rate in the early hours of the 11th (Korean time).

The market currently expects a rate cut. The probability of a rate cut implied by futures market positions stands at 86.2%, and within the market a cut is viewed as the overwhelming "consensus." Accordingly, elements such as the dot plot and the distribution of votes for and against the policy rate may matter more than the decision itself at this meeting. Elsewhere this week, Australia, Canada, and Switzerland will also decide on policy rates, but all are expected to hold, so their market impact may be limited.

Earnings from major U.S. tech companies could also have ripple effects on the domestic market. Jo Jun-gi, an analyst at SK Securities, said, "If what comes out of the FOMC does not significantly deviate from market expectations, the Broadcom and Oracle earnings events will have a greater impact." He added, "If Broadcom — the largest among the Alphabet value chain — and Oracle — the stock the market worries about most — dispel concerns, it would be positive for the domestic market; if not, it would be negative." By Korean time, Oracle reports early Thursday morning and Broadcom early Friday morning.

Experts warn that even if domestic markets start the week in a favorable mood, major events over the week will increase volatility. Han Ji-young, a researcher at Kiwoom Securities, advised, "With the simultaneous futures and options expiration scheduled for Thursday, be prepared for expanded supply-demand volatility in the cash and futures markets." She added, "As major indicators are released and market participants interpret them differently, the market's direction may be temporarily distorted, so rather than making large investment decisions in a single day, approach from the perspective of staggered betting on a daily basis."

Jeon Beom-jin reporter forward@hankyung.com