[Good Morning Market] "Recession Concerns Still Burden... Inflation Easing Is Positive"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] On the 4th (local time), with the U.S. stock market closed for Independence Day, European stock markets closed mixed. France's Paris stock market CAC40 index rose 0.4% from the previous trading day to 5954.65, and the UK's London stock market FTSE 100 closed up 0.9% at 7232.65. The pan-European index Euro Stoxx50 was up 0.1% at 3452.42. Meanwhile, Germany's Frankfurt stock market DAX30 index closed down 0.3% at 12,773.38.

Despite the inflow of rebound buying, the mixed performance of European stock markets is expected to weigh on the domestic stock market. However, the gradual easing of inflation, such as the decline in U.S. gasoline prices, could alleviate recession concerns, which may have a positive impact on the domestic stock market on the 5th.

◆ Seo Sang-young, Head of Media Content Division, Mirae Asset Securities = The fact that inflation is showing a gradual easing trend is positive. U.S. gasoline prices, which exceeded $5 per gallon on June 10, have recently continued to decline and fell below $4.8. Although still high compared to the May average of $4.5, the shift to a downward trend is expected to increase downward pressure on inflation going forward. Additionally, U.S. housing rents are gradually decreasing. While rents remain high in expensive cities, the general shift to a decline indicates that concerns about high inflation easing and consumption reduction due to rising costs may be alleviated.

In this situation, agricultural product prices continue to decline, such as wheat prices falling to pre-Ukraine crisis levels. Also, news that the U.S. government may announce the removal of some tariffs on Chinese imports is positive.

The downward trend in gasoline prices, housing rents, and used car prices, which have driven high U.S. inflation, can ease recession concerns and is expected to limit the decline in the domestic stock market. The release of China's June Caixin Services Purchasing Managers' Index (PMI), expected to improve due to the lifting of Shanghai lockdowns, is also likely to have a positive impact.

◆ Han Ji-young, Researcher at Kiwoom Securities = Inflation issues are expected to cause market volatility for a considerable period. However, attention should be paid to the fact that inflation is being eased due to the surge in living costs and the burden of the U.S. Federal Reserve's interest rate hikes.

The impact of weak demand is lowering gasoline prices in the U.S., and this week, the Biden administration is reportedly set to reduce tariffs on some items from China as part of inflation response measures. Although it is true that inflation will be difficult to control quickly, the expectation that inflation peak-out will appear in the June-July data remains valid.

The domestic stock market is expected to show limited price movement today. However, technical buying centered on oversold stocks such as semiconductors and materials, parts, and equipment (MP&E) is expected to support the lower end of the index. Also, the direction of Asian stock markets influenced by the June Caixin Services PMI results from China during the trading session and the domestic June Consumer Price Index (CPI) are expected to increase market sensitivity.