[Morning Briefing] Fed, two consecutive rate cuts… New York stocks shaken by Powell's hawkish admonition

◆ Divided Fed, two consecutive rate cuts… quantitative tightening to end in December

The U.S. central bank (Fed) cut its benchmark interest rate by 0.25% percentage point (p) on the 29th (local time). Following a 0.25% percentage point cut last month, this was the second consecutive rate cut in as many months. At the Federal Open Market Committee (FOMC) meeting that day, the Fed said it decided to lower the target range for the federal funds rate from 4.00∼4.25% to 3.75∼4.00%. In the FOMC statement, the Fed said, "So far this year, the pace of job gains has slowed and the unemployment rate has risen somewhat but remained low through August," and "more recently released indicators are consistent with this pattern." The Fed also announced that it will end the quantitative tightening (QT; balance sheet reduction) that it resumed in June 2022, effective December 1. Quantitative tightening refers to the method by which the Fed absorbs market liquidity by selling the bonds it holds or not reinvesting proceeds after maturities. This appears to be a measure taken in response to recent signs of reduced short-term market liquidity.

◆ New York stocks shaken by Powell's hawkish admonition… mixed close

The three major U.S. stock indices closed mixed. Markets were rattled by disappointment after Jerome Powell, chair of the U.S. central bank (Fed), distanced himself from the possibility of a December rate cut. However, technology stocks held up as Nvidia surged on expectations for an AI vision, pushing its market capitalization past $5 trillion for the first time. On the 29th (U.S. Eastern Time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average closed at 47,632.00, down 74.37 points (0.16%) from the previous session. The S&P 500 fell 0.30 points (0.00%) to 6,890.59, while the Nasdaq Composite rose 130.98 points (0.55%) to 23,958.47. As expected, the Fed cut the policy rate by 25bp at the concluded FOMC regular meeting, bringing the Fed's federal funds rate target range to 3.75~4.00%. Nvidia, however, bolstered optimism in tech stocks by becoming the first company to surpass a $5 trillion market cap. Nvidia closed at $207.16, up 3.05% from the previous day, pushing its market cap over $5 trillion based on the closing price.

◆ Trump leaves and Xi Jinping arrives… daily 'ultra-tense mode'

After Donald Trump, the President of the United States, finishes his one-night, two-day schedule in Gyeongju and departs, Xi Jinping, President of China, will visit Gyeongju. With major state guests arriving one after another, Gyeongju remains under heightened security and protection, keeping the city in an ongoing state of high tension. Xi is scheduled to arrive at Gimhae International Airport on the morning of the 30th and hold a summit with President Trump in Busan. President Trump, who arrived on the 29th, completed a one-night, two-day schedule including a summit with President Lee Jae-myung, and is moving to the location for the summit with Xi the following morning. After the summit with President Trump, Xi will immediately head to Gyeongju. Specific security routes and schedules are not being disclosed. Xi is expected to participate in APEC summits and a banquet on the 31st and hold a China–Korea summit with President Lee on November 1. He is also reported to plan events involving Chinese and Korean businesspeople and government officials during his visit.

◆ Yoon to appear in insurrection trial after four months… expected clash with witness Kwak Jong-geun

Former President Yoon Suk-yeol, who is on trial on charges of leading an insurrection, will appear in the insurrection trial in person for the first time in about four months. According to the legal community on the 30th, the Seoul Central District Court Criminal Division 25 (Presiding Judge Ji Gwi-yeon) will hold a continuation of the main trial for Yoon's charges of leading an insurrection and abuse of power and obstruction of the exercise of rights. Former Army Special Warfare Command commander Kwak Jong-geun will appear as a witness at the trial that day. Kwak previously testified at the National Assembly and at the Constitutional Court's impeachment proceedings for Yoon that he had received instructions from Yoon during the period of emergency martial law to "pull lawmakers out of the National Assembly," conveying the substance of such orders. Yoon, who was re-arrested on July 10, had been absent from the insurrection trial for 16 consecutive hearings, but with Kwak—whose testimony was unfavorable to him—appearing as a witness, Yoon appears to have chosen to appear in court to directly counter the testimony. There is also a possibility that Yoon will obtain an opportunity to speak in court and directly question Kwak.

◆ President Lee to likely hold talks with Japanese PM in Gyeongju today

President Lee Jae-myung and new Japanese Prime Minister Sanae Takaichi are expected to hold their first Korea–Japan summit on the 30th in Gyeongju, North Gyeongsang Province, the host city of the Asia-Pacific Economic Cooperation (APEC) summit. It is reported that President Lee is coordinating a meeting with Prime Minister Takaichi, who is visiting Korea for two nights and three days. If the two leaders meet, it will be Prime Minister Takaichi's first summit since taking office on the 21st. The key question is whether the rapport between the Korean and Japanese leaders that President Lee demonstrated by quickly restoring shuttle diplomacy with former Prime Minister Shigeru Ishiba can be extended to Prime Minister Takaichi, who is considered to have right-wing leanings. Although Prime Minister Takaichi is known for her hardline conservative stance, she has shown a posture that values Korea–Japan cooperation since taking office. In particular, Prime Minister Takaichi has regularly visited the Yasukuni Shrine, where Class-A war criminals from the Pacific War are enshrined, but it is reported that she refrained from visiting during the recent autumn festival period in consideration of diplomatic relations with Korea and China.

◆ Plot to kidnap and murder a YouTuber leads to arrests… "flight risk"

Two men in their 20s–30s accused of attempting to kidnap and murder a famous YouTuber in an apartment underground parking lot in Incheon have been detained by police. On the 30th, the Yeonsu Police Station in Incheon arrested A and another man in their 20s–30s on charges including attempted murder and unlawful confinement. Judge Yoo Aram, who handles warrants at the Incheon District Court, conducted a pre-arrest suspect interrogation (warrant hearing) the previous afternoon and issued arrest warrants for A and others, saying there was a "risk of flight." A and others are accused of abducting a male YouTuber in his 30s, B, from an underground parking lot of an apartment in Songdo-dong, Yeonsu-gu, Incheon at around 10:40 p.m. on the 26th, putting him in a vehicle, and repeatedly striking him with a blunt instrument to try to kill him. They are believed to have lured B to the apartment parking lot by promising to pay him money, placed him in a vehicle, and driven him about 200㎞ to Geumsan County, Chungcheongnam-do. Police, responding to B's report, tracked the vehicle and arrested A and his accomplices in Chungnam as flagrant offenders about four hours later.

◆ Wide daily temperature range nationwide… daytime highs expected around 17–21°C

On Thursday the 30th, morning temperatures will be below 10°C and feel cold, but daytime temperatures will rise to around 20°C. The Korea Meteorological Administration forecasted that the central region will be mostly clear, while the southern region and Jeju Island will be occasionally cloudy, and clouds will gradually increase nationwide from the afternoon. Morning lows are expected to be 2–11°C and daytime highs 17–21°C, similar to normal (lows 2–12°C, highs 16–20°C). Expect large temperature differences of around 15°C between day and night, especially inland, so pay attention to health management. Frost or ice may form in inland central regions and inland North Gyeongsang. There may be dense fog in the central inland and North Gyeongsang inland through the morning. Fine dust concentrations are expected to be "Good"~"Moderate" across all regions.

Cha Eun-ji, Hankyung.com reporter chachacha@hankyung.com