June US Rate Cut Rumors Resurface, Fueling Market Rally in Stocks, Gold, and Coins

Powell's upbeat comments on “softening US inflation” saw New York's three main indexes hit all-time highs; US Micron up 18.2% after hours

US Federal Reserve Chairman Jerome Powell holds a press conference US Federal Reserve Chairman Jerome Powell on the 20th (local time). On this day when President Powell said: “Downtrend continues,” New York's three major stock market indexes hit all-time highs. Washington = AP Newsis

“US inflation continues to decline” (US Federal Reserve Chairman Jerome Powell)

“High Bandwidth Memory (HBM) is a miracle technology” (Nvidia CEO Jensen Huang)

The global financial market was shaken by the words of the two giants who control the global economy and artificial intelligence (AI) ecosystem. While Federal Reserve Chairman Powell and CEO Hwang continued to make announcements that sent positive signals to the market, the three major US New York stock market indexes broke their all-time highs on the 20th (local time). 2 years and 5 months have passed since November 2021.

The Korean and Japanese stock markets also reacted sharply. The KOSPI ended trading at 2,754.86 on the 21st, breaking above the 2,750 mark for the first time in 23 months since April 2022, based on the closing price. The average share price of the Nikkei 225 (Nikkei Index), a representative index of the Japanese stock market, also hit a 17-day all-time high on positive tailwinds from the US stock market. The “Rally of Everything” took place, during which the prices of all assets rose, including gold and Bitcoin. A US Wall Street official analyzed. “Chairman Powell led the market's optimism by raising expectations for rate cuts amid a strong U.S. economy, and CEO Hwang predicted the arrival of a new economy driven by explosive artificial intelligence.”

● Market turns to “likely contraction in June”

On this day, the Federal Reserve froze its benchmark interest rate at 5.25-5.50% at the Federal Open Market Committee (FOMC) and announced the “Summary of Economic Outlook (SEP)”, which contains the Fed's quarterly economic forecasts. The average interest rate at the end of the year was 4.6% (4.5-4.75%), according to the dot chart, which received a lot of attention, the same as forecast last December, suggesting three cuts of 0.25 percentage points. each during the year.

Although the rate of US Consumer Price Index (CPI) growth exceeded market expectations in January and February, the Federal Reserve maintained its previous forecast. Regarding the latest figures, President Powell said: “It's a bumpy road to the 2% inflation target,” but “the overall story doesn't change.”

Global stock markets rose as they weighed on expectations that the Federal Reserve's first rate cut since the FOMC would take place in June. The Standard & Poor's (S&P) 500 index rose by 0.89% today, surpassing the 5200 mark for the first time. The Dow Jones Industrial Average rose 1.03% and the Nasdaq Composite Stock Index rose 1.25%, with all three major indexes surpassing their highs. The influence of the US stock market continued in Korea and Japan. According to the Korea Stock Exchange, KOSPI closed trading at 2,754.86 points, increasing by 64.72 points (2.41%) compared to the previous day. Foreigners and institutions each made net purchases of more than 1 trillion won, driving the index higher. The KOSDAQ also closed at 904.29 points, up 1.44%. The Nikkei index also closed at 40,815 yen, up 2.03% from the previous day. Despite the first rate hike in 17 years, the stock market is strong and the yen is trending higher (yen lower).

● Semiconductor stocks soar on AI spring wind

The spring wind of AI-based semiconductors is also a major reason for the stock market's rise. As CEO Hwang praised HBM's growth potential yesterday, saying, “Samsung Electronics and SK Hynix grow with us,” the stock price rose for two consecutive days. Samsung Electronics rose 3.12% on the 21st to end trading at 79,300 won, after rising 5.63% the previous day. SK Hynix also increased by 8.63% compared to the previous day.

In particular, after saying that Samsung's 5th generation HBM, the “HBM3E” is “under review”, he directly visited the Samsung showroom for NVIDIA's developer event “GTC 2024”. : Here he wrote “Jensen Approved” and signed the actual HBM3E.

Micron, a leading U.S. memory semiconductor company, saw its share price rise 18.2% on strong performance in its fiscal second quarter (November 2023-February 2024) compared to by 57%. compared to the same period last year.

As the US Federal Reserve took a softer-than-expected stance, a rate cut by the Bank of Korea for the year was also on the horizon. It is believed that if the US cuts interest rates in June, as expected, the Bank of Korea is likely to begin discussions on cutting interest rates immediately.

New York, San Jose = Correspondent Kim Hyun-soo kimhs@donga.com
Tokyo = Correspondent Lee Sang-hun sanghun@donga.com
Reporter Lee Dong-hoon dhlee@donga.com

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