MACRO INSIGHT 07
U.S. Inflation Surprises and the Repricing of Korean Equities
Inflation, Interest Rates and Foreign-Investor Flows
Key Conclusion
Upside U.S. inflation risk increased, but one release cannot explain Korea’s selloff and rebound. Korea’s 15 October decline preceded PPI; lower U.S. long yields on the PPI release date and Korea’s subsequent rebound do not establish that inflation risk has eased. Required returns, corporate earnings, foreign cash/futures flows and FX must be assessed together.
Research Summary
This report examines the September 2026 U.S. CPI and PPI releases alongside Korea’s 15–16 October equity selloff and rebound. Core CPI rose 0.3% month on month against a Reuters poll of 0.2%; final-demand PPI rose 1.3% against 0.5%. Korea’s regular-session selloff on 15 October, however, ended six hours before PPI was released and cannot be attributed directly to that later release.
The analysis separates energy and shelter in CPI from goods, services and trade margins in PPI. The 0.7% PPI measure excluding foods and energy differs from the 0.5% measure that also excludes trade services. Headline retail sales and the control group likewise provide different signals; neither is a measure of total real consumption. Matched U.S. Treasury par-curve data show the 10-year yield falling 9 basis points on 15 October. Higher inflation and lower long yields can coexist, so Treasury yields alone do not determine equity required returns.
For Korea, the report compares cumulative index returns, loss recovery, foreign cash and futures flows, and 15:30 USD/KRW rates. Foreign KOSPI cash buying on the 16th coexisted with KOSPI 200 futures selling, while the rebound did not reverse the prior loss. TradeLens interprets the episode as repricing across inflation, growth, earnings and positioning. The next tests are core PCE, real spending and income, corporate results, and consistency across cash/futures flows and FX. An illustrative discount-rate model is not a stock or index target.
Key Points
- Korea’s 15 October selloff ended six hours before PPI, requiring a clear separation of post-CPI and post-PPI market responses.
- The 0.7% PPI measure excluding foods and energy differs from the 0.5% measure also excluding trade services; component changes are not additive contributions.
- The U.S. 10-year par yield fell 9bp on the PPI release date, but lower Treasury yields do not establish improving equity risk premiums or earnings expectations.
- Korea’s 16 October rebound recovered only part of the prior loss, while foreign KOSPI cash buying coexisted with KOSPI 200 futures selling.
- The next tests combine core PCE, real spending, corporate earnings and alignment across foreign cash/futures flows and FX.
Sources and corrections
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