China's Economic Recovery Plan Announcement... Asian and European Markets Rise, Excluding Korea

China's Inflation at 0.2% Annually, Announces "Demand Stimulation and Financial Easing Next Year"

This Week's US Core CPI Expected at 3.3%,

US 25bp Rate Cut Probability Increases to "87%"

The capital markets in the Middle East, France, and Korea are fluctuating, while Hong Kong's stock market rebounded and the European market started on an upward trend due to China's economic recovery plan, marking the beginning of the week. This week, major factors affecting the market include the US November Consumer Price Index (CPI) report to be released on Wednesday, as well as interest rate decision meetings in several countries such as the European Central Bank, Canada, Switzerland, and Australia.

According to Bloomberg News and other foreign media on the 9th (local time), the Hong Kong stock market, which started with a decline, closed with a 2.8% rise as the Chinese authorities announced an economic recovery plan including monetary easing. China's 10-year government bond yield fell by about 4 basis points to 1.922%, recording an all-time low. Bond yields and prices move in opposite directions.

The MSCI Asia Pacific Index and the MSCI Emerging Markets Index rose by 0.3% and 0.5%, respectively. The Nikkei also rose by 0.18%. On the other hand, the Korean stock market, which faced increased uncertainty due to the failure of impeachment, plunged by 2.7%, and the Korean won fell by 1% against the US dollar.

The European market also opened with an upward trend due to the impact of China's economic recovery plan. The European Stoxx 600 benchmark rose by 0.3% on expectations of China's economic recovery plan and the European Central Bank's (ECB) rate cut. It is expected to record an eight-day consecutive rise, reaching the highest level in six weeks. Luxury goods manufacturers, mining stocks, and automobile manufacturers, which are heavily influenced by China, led the upward trend. The German DAX index also rose by 0.2%, recording an all-time high.

In the early morning Eastern Standard Time, S&P 500 futures, Nasdaq futures, and Dow Jones futures showed similar movements to the previous session. The 10-year bond yield remained almost unchanged at 4.16%, and the dollar showed little change against major currencies such as the euro and yen compared to last weekend.

On this day, it was revealed that China's November consumer prices rose by only 0.2% year-on-year. This was interpreted as showing the limitations of the existing economic recovery measures in stimulating demand, as it was lower than the 0.5% rise expected by analysts. Accordingly, it is interpreted that the Chinese authorities announced the economic recovery plan early ahead of the Central Economic Work Conference starting on Wednesday.

Bitcoin traded down 0.9% at $99,143.51. Ether fell by 2.7% to $3,885.12.

Despite OPEC+'s extension of production cuts, international oil prices rose slightly due to increased uncertainty in the Middle East after the collapse of Bashar al-Assad's dictatorship. Brent crude rose by 1.3% to trade at $72.04 per barrel. Spot gold rose by 0.5% to trade at $2,646.88 per ounce.

Economists expected that the core inflation rate, which the Federal Reserve is watching closely, would remain at 3.3% in the US November consumer price report to be released this week. This is not expected to negatively affect the Federal Reserve's rate cut this month.

JP Morgan stated, "Despite the recession in the Eurozone and increased political stress, recent economic data aligns with the prediction that global economic growth will increase by the end of the year." JP Morgan predicted, "The policy rates of Canada, the Eurozone, and Sweden will fall below 2% next year, and the rates of the US and the UK will approach 4%."

As of 5 a.m. on this day, according to CME FedWatch, the interest rate futures market sees an 87% probability that the Federal Reserve will cut rates by 0.25 percentage points at the December Federal Open Market Committee (FOMC). This is an increase of nearly 20% from the 68% before the US employment report was released on the 6th.

Guest Reporter Kim Jeong-ah kja@hankyung.com