Korea Stocks Eye US Rate Path Amid Inflation Signals
The Korea stock market is expected to be heavily influenced by the US Government Bonds yields stabilization and inflation indicators in the upcoming week. The US Treasury will expand the size of its long-term bond buyback, which could drive up Government Bonds prices and push down long-term yields.
On the 9th, the US Treasury will increase the per-operation purchase size from $2 billion to $4 billion. On the 10th, the August Producer Price Index (PPI) will be released, with a market expectation of a 5.2% rise from a year earlier.
The PPI is expected to be influenced by the surge in semiconductor prices, which has fanned prices for communications and electronic equipment. However, the market does not see a high likelihood that producer prices will spill over to consumer prices.
On the 11th, the August Consumer Price Index (CPI) will be published, with the Federal Reserve Bank of Cleveland estimating CPI to rise 3.4% from a year earlier. If CPI tops market expectations, inflation worries could flare again, potentially lifting US Government Bonds yields and adding downward pressure on stocks.
The same day, preliminary University of Michigan 1-year and 5-10 year inflation expectations for September will also be released. Inflation expectations show how high consumers expect future inflation to be.