Global stock markets are recovering the plunge.

Short Comment

The uncertainty has still proceeded, which is making Federal Reserve alert to the situation. The brokers are suggesting that Federal Reserve could start lowering its interest rate in the latter half of this year. However, The US stock market has shown strong momentum, and S&P500 is targeting 3,000 again.

Trade war between the US and the rest of the world is still proceeding. Even though Asian markets, which have much bigger exposure to the war than European markets, are recovering the plunge, the degree of the recovery in the markets is more sluggish than that of the US market. KOSPI200 and HangSeng are targeting 280, and 28,000 respectively, but those are much lower than those in the last year.

Of course, it is not just the trade war to make the markets sluggish. The uncertainty in the global economy is giving more volatility to Emerging Market of Asia than the US. The currency market is reflecting it. USDRMB and USDKRW are around 6.9 and 1,180 respectively. On the other hand, the hedging instrument for the volatility in the FX market, Japanese Yen is in bullish momentum, USDJPY around 108. Dollar index still is in bullish momentum too, around 98.

The uncertainty is making the central banks to show dovish stance, not just US Federal Reserve. President of ECB, Mario Draghi, made additional dovish message just today. At June 12, Ju-yeol Lee, President of Bank of Korea, made a message which was interpreted as dovish one in the markets. The uncertainty, low inflation and the stances are being catalysts for strong Fixed Income markets.

Even though the uncertainty will be proceeding for a while, the stock markets, at least Korean market, will be fine. The main reason is the situation of the US. The bullish trend of the US market will be proceeding for a while, with not bad macroeconomic indices. Interest rates are in favor of the stock market too. Yield of 10year US T-Note Yield is around 2.1%, which is targeting 1.5%. Dividend rate of S&P500 is around 2%. Yield spread between 2year and 10year US T-Notes still has enough time to touch minus level.

KOSPI200 has no problem in following it unless USDKRW goes beyond 1,200. The main cause of under-performance of the regional index had been the uncertainty for the future of Samsung Electronics, the biggest share in the index, which is being eliminated now.