[Good Morning Market] European Stocks Rebound Despite Fiscal Concerns... Will the Korean Market Follow?

European Defense Stocks Lead Rebound Amid U.S. Market Closure
Semiconductor Shares Poised for Recovery in Korean Market

While the U.S. stock market was closed, European stock markets ended with a slight increase. The rebound was driven by strong performances in the defense, pharmaceutical, and financial sectors, but gains were limited due to concerns over fiscal issues in each country and rising government bond yields. As uncertainty remains regarding the September market outlook, attention is focused on whether the domestic stock market will also rebound.

On September 1 (local time), the pan-European Stoxx Europe 600 Index closed at 551.43, up 0.23% from the previous trading day. The German DAX Index and the UK FTSE Index rose by 0.57% and 0.10%, respectively. The French CAC Index also ended up by 0.05%.

Contrary to U.S. President Donald Trump's bold statements, negotiations between Russia and Ukraine for an end to the war have stalled. In response, Europe is reportedly planning to formalize multinational troop deployments to Ukraine and to promote weapons production and procurement through a weapons loan fund. As a result, capital has flowed into the European defense sector.

The U.S. stock market was closed for the Labor Day holiday. The U.S. dollar continued its weakness. In the Seoul foreign exchange market the previous day, the won-dollar exchange rate stood at 1,393.70 won. This is believed to be due to ongoing market uncertainty after a U.S. court put a brake on Trump's tariff policies.

However, ahead of the employment report, there is some optimism that a September rate cut will proceed as planned. West Texas Intermediate (WTI) crude and Brent crude prices rose by 0.94% and 1.0%, respectively. Gold futures also climbed nearly 1%, trading at $3,545 per ounce. Despite expectations of a rate cut, Bitcoin prices remained stagnant, staying below $110,000.

In the domestic stock market, semiconductor stocks plunged the previous day due to the Trump administration's equipment import restrictions. Leading domestic semiconductor companies, Samsung Electronics (-3.01%) and SK Hynix (-4.83%), both fell by more than 3%. The ongoing slowdown in U.S. exports from Korea, which is now clearly affected by tariffs, remains a burden.

However, with easing political uncertainty in Europe and rising U.S. futures markets, technical buying is expected to flow into semiconductor stocks, which plunged the previous day, leading to a potential rebound. Although domestic defense stocks faced pressure after a sharp rise the previous day, European defense-related developments are expected to continue supporting their prices.

Han Ji-young, a researcher at Kiwoom Securities, stated, "During the process of confirming the tariff shock in August's export data, it is important to note that market expectations for key indicators such as the U.S. Institute for Supply Management (ISM) Manufacturing Purchasing Managers' Index (PMI), retail sales, and the Consumer Price Index (CPI) may be lowered. As expectations decline, the likelihood of a shock when the actual events occur decreases, which will help limit the risk of a disruption in the stock market trend."