Lee Chun-kwang, CEO of Legnum Investment Advisory, analyzed the impact of prolonged high interest rates and geopolitical conflicts on the global economy, forecasting that the US-China summit would be a critical turning point for inflation.
The 10-year Treasury yield is nearing 4.4%, a sharp increase compared to less than 2% two years ago.
This upward pressure on interest rates is caused by several factors, including rising producer price index (PPI) and surging oil prices.
KOSPI, which surged over the past year, is currently giving back a significant portion of its gains. Today, foreign investors showed simultaneous selling in the KOSDAQ and KOSPI futures markets, leading to a decline in the domestic stock market.
Due to the nature of emerging markets, which tend to exhibit high volatility, foreign investors' trading patterns significantly influence the domestic stock market.
This acts as a major support level for the current stock market.
However, factors such as expanding fiscal deficits and the potential for a Middle East war are cited as increasing pressure for higher interest rates.
Expectations are growing for the possibility of government bond buybacks and the role of the Federal Reserve (Fed), with the Fed's explicit commitment to active intervention deemed crucial.
Former President Trump's remarks during the midterm elections could be interpreted as a tactical deception strategy.
The U.S. might believe it would be in a more advantageous position to assert its demands at the negotiating table if its counterpart, China, were in a difficult economic situation.
Therefore, the U.S. might intend to pressure the Chinese economy through a war with Iran. Such geopolitical conflicts, along with changes in US-China relations, are expected to directly impact global inflation.
Should a war with Iran break out, it could lead to surging oil prices and disruptions in the global supply chain, severely impacting China's energy supply and production activities, thereby acting as a worldwide inflationary pressure.
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