[Good Morning Market] Global Stimulus Policy Expectations 'Soaring'... Will the Market Shake Off COVID Fear?

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] The U.S. stock market closed sharply higher, buoyed by the U.S. government's large-scale stimulus package and the Federal Reserve's (Fed) announcement of corporate paper (CP) purchases. Europe’s stock markets also rose on news of stimulus measures from various governments.

On the 17th (local time), the New York Stock Exchange continued the worst plunge since the 1987 'Black Monday' after opening, but succeeded in a steep rebound as measures from the federal government and central bank were announced one after another.

On that day, the Dow Jones Industrial Average closed at 21,237.38, up 1,048.86 points (5.2%) from the previous trading day. The Standard & Poor's (S&P) 500 index also rose 143.06 points (6.00%) to 2,529.19. The Nasdaq Composite Index surged 430.19 points (6.23%) to close at 7,334.78. Domestically, the National Assembly passed an additional supplementary budget related to COVID-19 the previous day, and in addition to the temporary ban on short selling, additional stock market stabilization measures such as the Financial Stability Fund and Stock Market Stabilization Fund are also being prepared.

◆ Seo Sangyoung, Kiwoom Securities Researcher = Despite the sharp drop in the U.S. stock market the previous day, the domestic stock market showed a solid movement, with a rebound buying force flowing in due to excessive decline, even turning to rise at one point during the session. Considering that the U.S. stock market surged on positive factors such as the Fed’s announcement of CP purchases, the domestic stock market is expected to show strength. However, the sharp drop in international oil prices, the strong dollar, and the rapid increase in COVID-19 cases in the U.S. are burdens. The reduction in people’s movement due to this COVID-19 crisis and the fact that everything is being handled online have significant implications. COVID-19 may cause social changes that could raise expectations for increased sales of online-based companies.

◆ Jo Yeonju, NH Investment & Securities Researcher = The Fed announced the establishment of the Commercial Paper Funding Facility (CPFF) and its plan to purchase CP. U.S. policymakers emphasize their willingness to do whatever it takes to stabilize the market. Their continued communication with the market is also positive. Considering that the Trump administration’s corporate tax cuts amounted to $1.5 trillion over 10 years, this fiscal stimulus policy appears to be a large-scale stimulus card worth about $1 trillion over one year.

◆ Park Sanghyun, Hi Investment & Securities Researcher = The scale of the Trump administration’s fiscal stimulus can be evaluated as meeting market expectations for now. Particularly noteworthy is the cash support aimed at revitalizing consumption. Severe consumption damage is expected mainly in the service sector due to COVID-19, and this is seen as an active policy to stimulate consumption. Not only in the U.S. but also in various countries, cash support as disaster basic income for economic stimulus is being announced one after another, which is highly likely to make a significant contribution to consumption recovery after the COVID-19 situation calms down. Domestically, cash support plans are also being discussed, and the fact that the U.S. is likely to take the lead in cash support as an economic stimulus measure increases the possibility that cash support will be adopted as an additional supplementary budget policy in Korea in the future.

This content was produced with the assistance of AI translation services.