Korean stocks fell on Wednesday, with investors reluctant to form new positions before the announcement of Samsung Electronics’ results, amid anticipation of the company’s assessment of the prospects for demand for artificial intelligence products, while the won rose slightly against the dollar.
The main KOSPI index fell 43.20 points, or 0.62 percent, to 6,898.19 points by 01:38 GMT.
Samsung Electronics shares rose 0.18 percent, after rising more than 2 percent earlier in the session, while SK Hynix shares fell 1.52 percent.
Samsung Electronics is expected to announce on Thursday that its operating profits for the third quarter increased by about nine times on an annual basis, supported by strong demand related to artificial intelligence, despite analysts reducing their profit expectations by about 8 percent since the end of August.
Han Ji-young, an analyst at Keum Securities, said that the local market's gains will remain limited due to anticipation of Samsung's results and caution ahead of a public holiday later in the week. South Korean financial markets will be closed on Friday for the holiday.
The performance of other major stocks varied, as the battery maker LG Energy Solutions rose 0.38 percent, while Hyundai Motor and Kia declined 2.16 and 1.95 percent, respectively.
“Posco Holdings” steel shares fell 2.36 percent, while “Samsung Biologics” pharmaceutical shares fell 1.91 percent.
Of the 911 shares traded, 415 shares rose compared to 438 shares that declined, while foreign investors recorded net share sales worth 865.3 billion won ($646.93 million).
In the currency market, the won rose to 1,338.3 against the dollar, from 1,338.8 at the previous close, an increase of 0.04 percent.
In the debt market, the price of three-year Treasury bond futures for December delivery fell 0.01 points to 102.62, while the yield on three-year Korean bonds, the most liquid, rose 1.4 basis points to 3.949 percent.
The benchmark 10-year bond yield also rose 1.1 basis points to 4.384 percent.
The dollar fell on Wednesday, as pressures eased in European bond markets, while investors awaited the minutes of the Federal Reserve meeting and the statements of a number of its officials, searching for indications of the path of interest rates in the coming months.
The dollar index, which measures the performance of the US currency against a basket of major currencies, fell 0.03 percent to 101.94, after falling 0.27 percent in the previous session. The euro fell 0.08 percent to $1.1249, while the Japanese yen fell 0.19 percent to 158.43 against the dollar, and the British pound fell 0.08 percent to $1.3262.
Later on Wednesday, the Federal Reserve will release the minutes of its meeting held on September 15 and 16, when it raised interest rates to confront inflation, amid a decline in the tone of central bank officials after the release of weaker-than-expected inflation and jobs data in the United States last week.
Gavin Friend, chief market strategist at National Australia Bank, said there was “less urgency” for the Federal Reserve to raise interest rates after weaker-than-expected personal consumption expenditures and jobs data.
Market bets on raising US interest rates in October declined sharply, as CME's Fed Watch tool indicates a 20.5 percent probability of raising interest rates by at least 25 basis points this month, compared to about 51 percent a week ago.
But markets still expect rate hikes to resume later in the year, pricing in an 84.5 per cent chance of a hike at the December meeting.
On the other hand, the head of the Federal Reserve in Kansas City, Jeff Schmid, said on Tuesday that the central bank still needs to raise the base interest rate further to reduce inflation, even with the impact of the rise in long-term bond yields on economic activity in some sectors.
Samara Hammoud, currency strategist at Commonwealth Bank of Australia, said that the markets react strongly to every release of US data and every statement by Federal Reserve officials, in light of the limited future guidance, adding that the bank is likely to wait until December before raising interest rates again.
Federal Reserve officials Christopher Waller, Neel Kashkari and Alberto Musalem are scheduled to speak later Wednesday, which may provide additional indications on monetary policy directions.
In Japan, member of the Board of Directors of the New Bank of Japan, Ayano Sato, said in an interview with Kyodo Agency on Wednesday that she supports raising interest rates in stages.
Sources familiar with the bank's thinking said that the Bank of Japan may indicate this month that core inflation is close to reaching its 2 percent target, an indication of its readiness to raise interest rates again.
Global bond yields have been rising in recent weeks due to expectations of interest rate hikes by central banks, in addition to concerns about public financial conditions.
In Europe, pressure on French bonds decreased after the far-right candidate for the French presidency, Marine Le Pen, pledged to reduce spending by up to 140 billion euros ($158 billion) if she came to power in 2027, compared to a previous plan that aimed to save 125 billion euros.
The call for early elections in Spain also added to the recent pressure on the euro.
The Australian dollar fell 0.04 percent to $0.6979, and the New Zealand dollar fell 0.07 percent to $0.5617.
In the cryptocurrency market, Bitcoin fell 0.22 percent to $85,438.59, and Ether fell 0.12 percent to $2,695.22.
Asian stocks fell on Wednesday, despite US stocks recording new record levels, at a time when oil prices rose, and a storm approached the oil producing areas in the Gulf of Mexico, while investors awaited the minutes of the last meeting of the Federal Reserve Board in search of indications about the path of interest rates.
The broader MSCI index of Asia-Pacific stocks excluding Japan fell 0.3 percent, after US stocks closed higher. The index has risen 1.5 percent since the beginning of October.
On Wall Street, the Standard & Poor's 500 index recorded a new record level on Tuesday, after rising about 0.6 percent. The Nasdaq index, which is dominated by technology stocks, rose 0.45 percent to a record level, while the Dow Jones rose 0.5 percent.
In Asian trading, West Texas Intermediate crude rose 1.05 percent to $90.38 per barrel, while Brent crude rose 1.06 percent to $101.65.
The rise in oil came as commodity investors balanced fears of supply restrictions due to a storm heading to oil production areas in North America, the escalation of Houthi attacks on Saudi Arabia, and increased crude flows from the Middle East.
Vitol's CEO, Russell Hardy, said on Tuesday that about 12 million barrels per day of crude and two million barrels per day of refined products had left the Middle East on board tankers during the past seven to ten days.
In bond markets, the stability of global yields during the previous session helped support investors' appetite for US stocks.
French bond yields, which were subject to heavy selling, fell on Tuesday after far-right French presidential candidate Marine Le Pen pledged to cut spending and reduce the budget deficit. The 10-year French bond yield fell by more than 11 basis points, while the difference between it and German bonds narrowed to 132 basis points, after approaching 160 basis points last week, according to LSEG data.
Laura Cooper, head of macro credit and global investment strategy at Niven, said that the scale of the move is remarkable given that the 2027 elections are still months away, and that the deterioration of the French financial situation is not something new, adding that what has changed is the sharp rise in yields, which has made investors less willing to ignore financial vulnerabilities.
The decline in French bond yields helped the euro recover slightly and stabilize above the $1.1250 level.
Economists at ANZ wrote in a note that “a feeling of calm has returned to European bond markets,” with French, Italian and Greek bonds outperforming amid a broad rally.
In Asia, the yield of 10-year US Treasury bonds rose to 5.3 percent during morning trading, with long-term yields trending upward before an auction for 10-year bonds on Wednesday, and another for 30 years on Thursday. The auctions are expected to reveal the strength of demand for American debt.
Long-term US bond yields reached their highest level in 24 years on Monday, amid a continuing wave of selling since late August, against the backdrop of concerns related to inflation and debt.
As for Asian stocks, Australian stocks stabilized, while the Japanese Nikkei index fell 0.86 percent, and the Hang Seng Index in Hong Kong fell 0.63 percent in early trading, affected by a 4 percent decline in the index of biotechnology companies. Financial markets on the Chinese mainland remained closed for a holiday.
The dollar index, which measures the performance of the US currency against a basket of major currencies, rose 0.03 percent to 101.94, after falling 0.27 percent in the previous session. The Japanese yen fell 0.19 percent to 158.43 against the dollar, while the British pound fell 0.08 percent to $1.3262.
Commonwealth Bank of Australia analysts said that the stability of oil prices in US trading, the slight recovery of the euro, and movements in US Treasury bond yields put pressure on the dollar.
On Wednesday, the Federal Reserve will release the minutes of its meeting held on September 15 and 16, with investors scrutinizing the details of the discussion regarding interest movements during the coming months.
Traders' expectations for a US interest rate hike this month fell to 19 percent, compared to about 50 percent a week ago.
