Rate Cut Expectations Recede as June FOMC Looms with 'Hawkish Hold' Possibility

The U.S. Federal Reserve (Fed) is scheduled to hold its Federal Open Market Committee (FOMC) meeting from June 16-17. The market widely anticipates that interest rates will be held steady at the June FOMC meeting. NH Investment & Securities predicted a 'bear flattening' in the bond market alongside its forecast for a rate freeze at the March FOMC meeting.

This outlook could increase global economic uncertainty and weigh on the domestic stock market. Kiwoom Securities analyzed that a rate freeze is likely at the June FOMC meeting, which would lead to a retreat in expectations for interest rate cuts within the year. It was pointed out that the Fed's delay strategy could pose a greater burden on the market than the actual rate cuts themselves.

Furthermore, geopolitical risks in the Middle East, along with the FOMC meeting's outcome, were identified as key variables for the stock market this week. The KOSPI index had the potential to open lower due to Middle East risks and the prospect of a rate freeze. The KOSPI index is currently nearing a stable footing above the 2,600 level.

This week's stock market navigated its direction amidst two major variables: easing tensions in the Middle East and the FOMC meeting. Market participants closely watched for signals regarding the timing of interest rate cuts. The FOMC meeting results and the earnings of major big-tech companies were cited as crucial factors that will determine the future direction of the stock market.