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News summary on the way home from work, Subsletter Evening. 



The global stock market collapsed after a 'Black Monday'.

The KOSPI even broke the psychological resistance level of 2,500.

The shock in the financial market is caused by an inflation shock, and in the case of the US, there is a strong prospect of a rate hike.

Until just a few days ago, the so-called 'giant step', which raises interest rates by 0.75 percentage points at a time, was considered a card with little potential, but the atmosphere is changing.


Psychological resistance 2,500 KOSPI collapsed


The KOSPI continued its downtrend in the aftermath of the US price shock, and the 2,500 line, which was considered a 'psychological resistance line', also collapsed.

It closed at 2,492.97, and it is the first time in about a year and seven months since November 13, 2020 that the KOSPI has fallen below the 2,500 line based on the closing price.



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The KOSDAQ market went right before the 800 line collapsed and closed at 823.58, down 5.19 points (0.63%) from yesterday (13th).

The closing price of the KOSDAQ is also said to be the lowest since October 19, 2020. 



The exchange rate of the won against the dollar closed at 1,286.4 won per dollar, up 2.4 won from the previous day's closing price.


US stock market 'Warr'...'Black Monday'


Those who checked the US market this morning (14th) may be surprised by the crash, but the S&P 500 index, which represents the New York Stock Exchange, plunged 3.88%.

The S&P 500 has officially entered a bear market with a decline of more than 20% from its previous high.

The tech stock Nasdaq fell nearly 5%, and the Dow Jones Industrial Average fell 876.05 points (2.79%).

It is the first time in history that the Dow has fallen more than 500 points for three consecutive trading days.


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The cause of the financial shock is inflation, as the aftermath of the US Consumer Price Index (CPI) is growing.

The US CPI rose 8.6% in May, the highest in 41 years, raising concerns that austerity by the Federal Reserve (Fed) could intensify. It must have been pressed.



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Among New York stock market experts, there are many experts who predict the possibility of further declines due to the prevailing risk-averse sentiment in the market.


Inflation, inflation... The cause of fear is price shock


Let's see some more price news.

A new indicator of inflation has been released in the US, but the results are still worrisome.

Consumer expectations for inflation in the United States have also reached an all-time high, as the Federal Reserve Bank of New York's May Consumer Prospect Survey showed that the inflation rate expected over the next year was 6.6%.

This is a 0.3 percentage point increase from a month ago, and it is also the same forecast as in the March survey, which recorded the highest level since the survey started in June 2013. 



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A few days before the announcement of expected inflation, the US Consumer Price Index (CPI) growth rate (8.6%) was announced for May, which shocked the financial markets by hitting the highest level since December 1981.

The CPI growth rate peaked at 8.5% in March, right after Russia's invasion of Ukraine, fell to 8.3% in April, then slightly fell to 8.3% in April. The result was a result that overturned the market's expectations that it would have taken 



As the CPI is a result of the past, and the expected inflation corresponding to the forecast is high, it can be expected that US inflation will not be easily caught in the future.


'Giant Step' empowered


As indicators that the US inflation situation is worsening one after another, there is a forecast that the range of interest rate hikes will increase.

Last month, a 'big step' (0.5 percentage point) rate hike, the largest in 22 years, was raised, but this is not enough. 



According to <Yonhap News> reports, in the case of the Chicago Mercantile Exchange (CME) group's pedwatch, the Fed will raise the key interest rate by 0.75 percentage points at 7:23 a.m. (Central Standard Time) on the 13th at this June meeting. The probability is 93.0%, which is about four times higher than 23.2% as of the 10th day of the previous trading day.

The probability of a 0.5 percentage point increase, which has been considered 'orthodox' so far, has shrunk to 7.0%.

FedWatch is the result of estimating the probability of a change in the Fed's monetary policy as market participants judged based on the price data of the Federal Funds Rate (FFR) futures, which is the base rate.



At the same time, the prospect of an interest rate hike at the next FOMC meeting in July has also changed dramatically. At the July meeting, it is said that the probability that the base rate will rise to 2.25-2.50% soared to 79.7%.

What does this prospect mean?

A 0.5 percentage point increase at the June meeting means a 1.0 percentage point increase in July, and a 0.75 percentage point increase in June means another 0.75 percentage point increase in July.



Local media such as The Wall Street Journal (WSJ), CNBC, and The New York Times (NYT) are reporting the possibility of the Giant Step all at once. 



If the Fed takes this giant step as an observatory of the financial market, it will be the first in 27 years and 7 months since it raised 0.75 percentage points in November 1994.

That's why it's so urgent to respond to inflation.

The Fed's Federal Open Market Committee (FOMC), which decides which steps to take, will be held on the 14th and 15th local time.


Choo Kyung-ho "Complex Crisis Begins"


We are in a situation where we urgently need measures against inflation or people's livelihoods due to inflation, but the National Assembly has been left with a vacancy for more than a fortnight due to the delay in the composition of the National Assembly in the second half of the year.



Deputy Prime Minister and Minister of Strategy and Finance Choo Kyung-ho said, "In short, a complex crisis has begun and, more serious, the outlook is favorable that this situation will not subside for a while. Prioritize it, and together with the relevant ministries, please check and discover it with the attitude of mobilizing all policy tools to stabilize the livelihood of civilians.”

It is also known that he visited the Bank of Korea and held a private meeting with Lee Chang-yong, governor of the Bank of Korea.



Countermeasures will not be easy given that the liquidity of the global price increase and the resulting financial shock due to the Ukrainian war, food and energy supply shortages, and China's blockade policy does not show any signs of subside easily. It will be the first priority to gain the trust of the public and the market by showing how to respond.


a piece of the day

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This photo was taken by Kim Dong-yeon, the elected governor of Gyeonggi-do, visiting Pyeongsan Village in Yangsan, Gyeongnam to prevent former President Moon Jae-in.

Before going to Pyeongsan Village, President-elect Kim visited Bonghama Village in Gimhae and visited the tomb of former President Roh Moo-hyun, and then met Ms. Kwon Yang-sook.



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(Photo = Yonhap, provided by the Gyeonggi Governor Office Transition Committee)