EUROSTOXX50 would be excluded from the global recovery

2018.11.11
EUROSTOXX50
Closed at 3,229.49 (-0.25%) Target to 3,200 (-0.91%)
Indices
S&P500 2781.01 (-0.92%)
NASDAQ 7406.90 (-1.65%)
NIKKEI225 22,250.25 (-1.05%)
HangSeng 25,601.92 (-2.39%)
10y German Bund 0.407% (-0.051%)
EURUSD 1.1341 (-0.83%)
1. Even though EUROSTOXX50 had outperformed other indices, Its outlooks doesn’t look good. During October, the index had decreased by 5.93%. The fall wasn’t that bad if you compare it with other indices including S&P500, NIKKEI225 and HangSeng. But I believe it’s because the market had already gone through divestments. When S&P500 and NIKKEI225 was recovering its plunge of February, this year, from 2,600 and 20,500 to 2,900 and 24,000 respectively until September, the index wasn’t recovering its fall enough. It was showing the halt. I believe the global stock markets have momentum to recover its plunge of October. But it’s not for European market.
2. Bullish regional bond market will be proceeding for a while. Unlike ECB, which is showing confidence about regional economic situation, the real economic indices keep disappointing market participants. On the other hands, US is still in good shape. Even though some analysts are strongly insisting that there will be recession in near future, the economic indices of US and earnings of Corporate US are good enough. Yield spread between 2y and 10y of US T-Notes has enough time to touch minus level. S&P500 is recovering its plunge, touching 2,800 again in a past week. Participants are responding to the sluggish indices of Europe between the regions by buying regional Fixed Income Securities. German Bund remained bullish. Yield of 10y German Bund is preserving level of 0.3-0.4%. The spread between German Bund and US T-Note is rising with yield of 10y US T-Note touching 3.2%. End of QE couldn’t raise yield of the Bund for a while. Even though the institution ends its policy in near future, participants will never leave the bond market as long as the sluggish indices don’t change. ECB is strongly pronouncing that the institution will not raise its policy rate at least until next summer, and it will be providing harbor of European interest rate markets for investors who want to escape from volatile US interest rate markets. Traditional relationship between bond market and stock market will give pressure to regional stock market.
3. Sluggish indices will be proceeding for a while. Uncertainties surrounding the zone, including slowing Chinese real economy, weakening regional banks, threat of trade war and regional political turmoil like Brexit or Italian populists, will not be helpful to solve the sluggish macroeconomic momentum. Those uncertainties will not be problems if the economic indices are making the participants happy. But the indices are failing it, and it is proved by regional bond market.
4. I believe EUROSTOXX50 is stuck in 3,100-3,300, and the confinement will be proceeding for a while. During whole 2019, I believe that the halt will be continued. What we need to see is yield of German Govt Bund, which reflects attitude of participants for the risk.
Mr. Banker, http://markety.tistory.com