[Good Morning Stock Market] Possibility of US Tariff Compromise... KOSPI Expected to Start Higher

On the 5th, the KOSPI is expected to start higher on news that the United States is willing to compromise on tariffs.

On the previous day, the Dow Jones Industrial Average closed at 42,520.99, down 670.25 points (-1.55%) from the previous session in the New York stock market. The S&P 500 index closed at 5,778.15, down 71.57 points (-1.22%), and the tech-heavy Nasdaq index closed at 18,285.16, down 65.03 points (-0.35%).

The New York stock market closed lower amid concerns over the U.S. tariff imposition and retaliatory tariffs announced by other countries, despite inflows of bargain buying following recent consecutive sharp declines. Some big tech stocks such as Tesla (-4.43%) and Meta (-2.23%) saw significant drops, but Nvidia's stock rebounded 1.69%, recovering its morning losses thanks to bargain buying.

Since November, the New York stock market had experienced a concentration effect influenced by the Trump administration's "America First" policy. However, recently, voices of concern over tariff policies, mainly from U.S. companies, have emerged, leading to side effects such as market corrections.

In fact, officials responsible for the Institute for Supply Management (ISM) Manufacturing Purchasing Managers' Index (PMI) in February expressed worries about delays in new orders, cost increases, and price hikes due to tariff uncertainties. Meanwhile, as of the previous day, the U.S. officially imposed tariffs of 25% on Mexico and Canada and 10% on China, further heightening concerns.

However, it is noted that China is imposing targeted tariffs only on some items while adjusting the level of retaliatory measures through dialogue, which differentiates the current situation from the 2018 trade dispute. It is also important to note that the U.S. may adopt a flexible tariff schedule in consideration of the responses of other countries and domestic public sentiment. In this regard, the remark by U.S. Commerce Secretary Gina Raimondo after the market close that a tariff compromise plan with Canada and Mexico will be announced is interpreted as a positive factor.

On the previous day, the domestic stock market started lower due to U.S.-originated negative factors such as President Donald Trump's formalization of tariff imposition during the holiday period and the simultaneous weakness of the Magnificent 7 (M7). However, it closed with a significantly reduced decline, supported by bargain buying following last Friday's sharp drop and news of increased European defense spending, which boosted defense-related stocks such as machinery and shipbuilding.

Han Ji-young, a researcher at Kiwoom Securities, forecasted, "Despite the increased volatility in the U.S. stock market due to tariff concerns, the domestic stock market is expected to start higher as the U.S. Commerce Secretary's remarks on tariff compromises with Mexico and Canada after the U.S. market close offset these effects."

Han added, "From an industry perspective, Germany's news of establishing a special fund of 500 billion euros to strengthen defense capabilities is favorable for defense-related stocks such as machinery and shipbuilding. However, since domestic defense stocks already surged sharply the previous day due to the narrative of increased European defense spending, profit-taking is expected during the session, leading to a rotation in supply and demand toward tariff-affected stocks such as secondary batteries and automobiles, which fell sharply the previous day."