[Good Morning Market] Wait-and-See Mode Ahead of U.S.-China Trade Talks... Korean Stocks Also in 'Wait-and-See' Mode

Joint Statement on U.S.-China Negotiations to Be Released on the 12th
U.S. Inflation and Consumer Data for April Also to Be Announced
"Market Volatility Expected Amid Focus on Tariff Impact"

Global stock markets are drawing attention ahead of the results of trade negotiations between the United States and China, which are being held in Switzerland. As U.S. inflation and consumer data for April, which can provide insight into the impact of tariffs, are also set to be released, both domestic and international stock markets are expected to remain cautious this week.

According to major foreign news outlets on the 12th (local time), senior government officials from the United States and China are scheduled to disclose the details of their trade negotiations in Switzerland and issue a joint statement. This is the first round of negotiations since President Donald Trump imposed a 145% tariff on China. While clear outcomes are not expected, even a commitment to lower the high tariffs and continue further negotiations would be considered a success.

On the previous day, May 9, before the negotiations began, the U.S. stock market ended mixed as investors adopted a wait-and-see approach. The Dow Jones Industrial Average closed down 0.29%, and the S&P 500 Index fell 0.07%. The tech-heavy Nasdaq Composite inched up by 0.78 points (0.00%), remaining nearly flat.

The market remains wary as President Trump has hinted at the possibility of lowering tariffs in negotiations with China, while also mentioning the likelihood of maintaining high tariff rates. Although the current U.S.-China negotiations could result in tariff rates being adjusted to between 50% and 80%, the persistently high levels are seen as a source of significant uncertainty.

There are also forecasts that market anxiety could persist even after the results of major trade negotiations are announced. Last week, President Trump signed the first trade agreement with the United Kingdom, but stated that "the basic tariff rate of 10% will be maintained under all circumstances." Since some degree of tariff increase is unavoidable, changes in supply chains, rising prices, and a contraction in consumption may follow.

This is why there is heightened attention on the U.S. Consumer Price Index (CPI) and retail sales figures for April, which are scheduled to be released this week. Wall Street expects the impact of President Trump's tariff policy to be fully reflected in the June inflation data. For now, it is difficult to feel the effects due to a surge in "panic buying" following the reciprocal tariffs. However, if the April CPI exceeds expectations, it could be interpreted as a faster-than-expected resurgence of inflation.

Michael Barr, Vice Chair of the U.S. Federal Reserve, has also stated that uncertainty stemming from trade policy has darkened the outlook, led to declines in consumer and business sentiment indicators, and is expected to result in slower growth and higher prices through the end of the year due to tariffs. John Williams, President of the Federal Reserve Bank of New York, also expressed concerns about inflation, emphasizing that "maintaining inflation expectations near target in times of high uncertainty is a core role of the central bank."

The Korean stock market is also expected to display a cautious, wait-and-see stance, reacting sensitively to the results of the U.S.-China negotiations and the release of U.S. inflation data. In addition to monitoring the progress of U.S. tariff negotiations with China and other countries, the market is expected to enter a phase where the effects of the universal tariffs and item-specific tariffs imposed since last month are being felt.

Han Jiyeong, a researcher at Kiwoom Securities, analyzed, "As the first-quarter earnings announcements, which had been a short-term driver for the stock market, are now in their final stages, macroeconomic variables will have a greater impact on stock prices for the time being." He added, "However, since the volatility is being driven by the existing factor of tariffs, its magnitude is unlikely to be greater than before."