Morning Market Briefing / Taking a Breather Amid Concerns Over Slowing Consumption
Taking a breather amid concerns over slowing consumption
- US December retail sales came in below market expectations, bringing concerns about an economic slowdown to the fore. As a result, global stock markets closed mixed and entered a breather phase.
- Treasury yields fell and stabilized, but the market's attention is focused on the US employment data (nonfarm payrolls) to be released tonight.
US stock market trends
"Consumers close their wallets, AI strikes the financial industry"
- Consumption data shock: December retail sales, during the year-end shopping season, were flat (0%) from the previous month, falling well short of the market consensus (0.4% increase). On concerns about shrinking consumption, major retail stocks such as Walmart (-1.8%) and Costco (-2.6%) led the decline.
- AI's ripple effect on the financial sector: Analysts suggested that the emergence of a tax management AI service (Altruist) would threaten the existing financial advisory market. As a result, wealth management stocks such as Charles Schwab (-7.3%) plunged, with AI technology putting downward pressure on the financial sector.
- Semiconductor strength: TSMC posted record monthly revenue, sustaining expectations for the semiconductor industry and continuing to rise on its own.
Interest rates and exchange rates
"Rates fall as concerns about economic overheating ease"
- Bond market: Weak retail sales cooled concerns about economic overheating, pushing Treasury yields lower. The US 10-year Treasury yield fell 5.9bp from the previous day to 4.14%. The probability of a rate cut in March rose slightly from 17% to 21%.
- Currencies and commodities: The dollar index held flat, and international oil prices reversed lower for the first time in 3 trading days on fatigue from the short-term surge, falling to the 63-dollar level.
- Investor sentiment: Overall risk-on sentiment remains intact, but it is a phase of heavy wait-and-see as investors look to confirm further upward momentum.
Korean stock market outlook
"KOSPI settles at 5,300, stock-picking market deepens"
- Market flow: The KOSPI has settled at 5,300 points and is showing a solid trend. Foreign selling pressure is low, but with no leading player to push the index up strongly, a market differentiated by individual stocks is expected.
- Investment strategy: A strategy focused on individual issues and themes rather than the direction of the index is effective.
Themes to watch
- Retail: Expectations that large supermarkets will be allowed to offer early-morning delivery (E-mart, Shinsegae, etc.)
- AI semiconductors: Beneficiaries of the government's construction of a national AI computing center (FuriosaAI-related value chain)
Checkpoints
"The watershed of super week: employment data and earnings announcements"
This week is a 'super week' packed with major macroeconomic data and big tech earnings announcements. In particular, the employment data to be released tonight is expected to be a key variable in the Fed's rate decision.
[Key checklist for tonight]
1. Macroeconomic indicators (Macro)
22:30 US January nonfarm payrolls & unemployment rate: A key indicator for Fed policy decisions. Be mindful of increased market volatility right after the release.
Next day 03:00 US 10-year Treasury auction
Other: Remarks by Fed officials, crude oil inventory release
2. Major corporate earnings announcements (Earnings)
- Before the open (Pre-market): McDonald's (consumer goods), Shopify (e-commerce), Vertiv (data centers), Unity
- After the close (Post-market): AppLovin (AI advertising), Cisco (networking), Albemarle (secondary battery materials)
- Korean companies: Doosan Enerbility, SM Entertainment, Kakao Games
[Remaining schedule this week]
- 12th (Thu): Korea options expiration day (beware of volatility), Kakao earnings announcement
- 13th (Fri): US January Consumer Price Index (CPI), Doosan Bobcat/Applied Materials earnings announcements