South Korea's Kospi Ends Flat After Erasing Early Losses; Steel Stocks Rally — Market Talk

The South Korean won tumbled around 1,435 per dollar, after hitting a near four-week high in the previous session, as investors turned cautious ahead of the Bank of Korea’s upcoming monetary policy decision.

Sentiment was further dampened as South Korea, heavily reliant on chip and auto exports, particularly to the US, faces growing risks from US President Trump’s tariff threats, potentially impacting shipments.

This has fueled calls for the central bank to cut rates, with a 25-basis-point reduction expected next week to support an economy that barely grew last quarter.

On a positive note, South Korean officials have requested an exemption from US steel and aluminum reciprocal tariffs during their visit to Washington this week.

Additionally, latest data showed that South Korea's business sentiment improved for the second straight month in February 2025, rising to 65 from 63 in January.

The South Korean won strengthened to the 1,435 per USD mark in February, the highest in nearly four weeks, supported by a pullback in the US dollar while markets digested the impact that shocks to Korea’s trade would have in foreign exchange flows.

US President Trump threatened to place a 25% tariffs on all autos and semiconductors in the White House’s latest series of restriction threats.

Such measures, if imposed, would place sharp strain in South Korea’s exports, with auto exports to the US contributing to 1.6% of the GDP, while US imports of Korean chips were set to grow this year production from Chinese competitors limit the country's import demand.

In the meantime, the Bank of Korea is expected to resume cutting its interest rate next week amid increasing growth concerns to the domestic economy.

0651 GMT - South Korea's benchmark Kospi fell 0.7% to close at 2654.06, snapping a seven-session winning streak. Foreign and institutional investors were net sellers, as some booked profit. Shipbuilding stocks led the retreat on profit taking after solid recent gains. Shipbuilder HD Hyundai Heavy Industries slumped 12% as its intermediate holding company HD Korea Shipbuilding & Offshore Engineering also dropped 9.0%. Both stocks lost ground after two straight days of gains. Chip maker SK Hynix fell 3.0%. USD/KRW settled almost flat at 1,437.90 in Seoul onshore trading. South Korea's 10-year government bond yield was down 0.9 basis point at 2.864%. (kwanwoo.jun@wsj.com)

0646 GMT - ​Long-dated government bond yields in developed markets have moved in tandem with those of U.S. Treasurys in recent months, but they will likely diverge in coming months, Capital Economics' Diana Iovanel says in a note. One explanation for the similarity in yield moves is that government bonds reflect common global factors which may affect bonds both in the U.S. and in other developed markets, the senior market economist says. Capital Economics expects the U.S. tariff effect on inflation in other developed markets to be generally limited. "We expect some of the rise in bond yields over recent months to unwind and domestic monetary policy to be the main driver of developed market yields over the rest of 2025." (emese.bartha@wsj.com)

0620 GMT - Communication by Chinese policymakers suggests they are likely to react not "pre-act" to potential tariff hikes, Goldman Sachs economists say. This implies a relatively low chance that 2025 budget numbers at the "Two Sessions" meeting in March will significantly beat expectations, they write. But if growth headwinds strengthen sharply, the door is open to additional stimulus beyond the budget, they say. GS expects China to keep real GDP growth target unchanged at around 5% for 2025, lower the consumer inflation target to around 2% from around 3%, and raise the official fiscal deficit target to 4.0% of GDP from 3.0% in 2024. Quotas for central and local government special bonds could be raised too. With consumption a top priority, China may also unveil details on consumption stimulus, GS says. (fabiana.negrinochoa@wsj.com)

0532 GMT - The Bank of Thailand may consider different easing measure than rate cut next week, HSBC Global Research's Aris Dacanay says in a research report. This is because the BOT, in cooperation with fiscal authorities, is poised to implement a debt relief program for households and small- and medium-sized enterprises, the Asean economist says. The program's key feature is that domestic banks will partially absorb costs of the program via net interest margins, the economist says. A rate cut just when the program starts could be a blow to banks' net interest margins. However, fiscal policy is losing traction and some monetary-policy support may be needed, HSBC says and expects the BOT to cut rates by 25bps each in 2Q and 4Q. (ronnie.harui@wsj.com)

0504 GMT - Bank Indonesia could cut rates twice by 25 bps each in 2Q and 3Q, bringing the policy rate to 5.25% where it could remain for the rest of 2025, UOB economists Enrico Tanuwidjaja and Vincentius Ming Shen say in a note. Based on BI's recent signals, it remains optimistic about Indonesia's economic resilience amid steady consumption and investment demand, despite internal and external headwinds, they note. They think BI's stance could indicate the potential for further cuts, but the timing will depend on economic conditions. (yingxian.wong@wsj.com)

0345 GMT - China will likely roll out more measures for the private sector after President Xi Jinping's meeting with business leaders earlier this week, HSBC economists say in a note. They describe the meeting as timely, noting that homegrown DeepSeek's recent AI breakthrough and the record box-office performance of Chinese animated film "Ne Zha 2" have reinvigorated optimism around the private sector's development. China's draft private sector promotion law is up for its second review at the National People's Congress meeting in March, the economists note. It may lead to "a swift implementation and offer more reassurance of Beijing's commitment to supporting the private sector," they say. Meanwhile, Shanghai's announcement of consumption vouchers may be a precursor to an expansion of consumption promotion policies nationwide, they say. (sherry.qin@wsj.com)

0328 GMT - The Singapore dollar slightly strengthens against its U.S. counterpart in the Asian session amid lower Treasury yields, which typically decreases the appeal of U.S. fixed-income assets and demand for the greenback. Traders are likely assessing various risks as well, analysts say. U.S. President Trump's tariff threats still loom, but it's unclear whether the tariffs will actually be enacted or be used as negotiating tools, note Maybank analysts in a FX Research & Strategy report. In addition, a peace deal for Ukraine remains uncertain, particularly with Trump calling Ukrainian President Zelensky a "dictator without elections," the analysts note. USD/SGD is 0.1% lower at 1.3409. (ronnie.harui@wsj.com)

0234 GMT - The Bank of Korea is expected to resume its rate cut next week to support growth. All but one in a WSJ survey of 27 economists expect the BOK to cut its base rate by 25 bps to 2.75% at its policy meeting on Feb. 25. "Growth remains weak," HSBC economist Jin Choi says, citing downside risks to growth due to rising U.S. tariffs. The volatile won-dollar trade last month let the BOK stand pat following back-to-back rate cuts in October and November. But the recently easing forex volatility may allow for another cut, Choi adds. The BOK is also expected to lower its 2025 growth forecast. (kwanwoo.jun@wsj.com)

0217 GMT - The euro-yen pair is forming a major bearish reversal pattern, based on the daily chart, Oanda's Kelvin Wong says in an email. Its swing highs of Nov. 16, 2023, July 11, 2024, and Oct. 31, 2024, have formed an impending major bearish reversal "head and shoulders" pattern, the senior market analyst says. This follows the currency pair's break below the support on a former long-term ascending channel in August. The 155.45 level marks the support on the neckline of the head and shoulders pattern, Wong notes. A daily close below that level could open the scope to trigger a major multimonth downtrend that may expose the next medium-term support levels of 151.00 and 145.60, the analyst adds. EUR/JPY is 0.6% lower at 156.98. (ronnie.harui@wsj.com)

0211 GMT - Bank Indonesia is likely taking a temporary pause in cutting rates, DBS Group Research's Radhika Rao says, noting the central bank's decision to leave rates unchanged on Wednesday. "A sharp deceleration in January inflation on policy measures and a likely negative fiscal impulse to growth in the first half due to spending cuts, leave the door open for further rate reductions," the senior economist says. DBS expects Bank Indonesia to cut rates by at least 50bps in 1H, with timing to be determined by the rupiah's movements, and the U.S. Fed's policy actions amid signs of stalling disinflation. (ronnie.harui@wsj.com)

0205 GMT - Indonesia's central bank may assess the 1Q GDP print in May before deciding on further easing, Barclays economist Brian Tan says in a note. BI's decision to hold rates steady in February also underscores the need to maintain rupiah stability, he notes. While economic growth remains a concern, Indonesia's 4Q 2024 GDP held at 5.02%, reducing the urgency for immediate cuts, he adds. BI may need time to assess the impact of the Indonesian government's new regulations on natural resource export proceeds, which take effect in March, on the rupiah and rate cut timing, he reckons. Barclays expects a 25bps cut in 2Q this year and another in 2Q 2026, though risks are tilted toward earlier-than-expected easing. (yingxian.wong@wsj.com)

0144 GMT - Data showing that Australia's labor market remains tight reinforces Capital Economics' view that the central bank will deliver a shallow easing cycle. Employment growth accelerating to 3.5% on year in January will gave the Reserve Bank of Australia pause for thought, putting employment well on its way to overshoot its 2.8% forecast across 1Q, says senior APAC economist Abhijit Surya. The rise in unemployment was in line with expectations but the uptick overstates the extent to which the job market loosened last month, as there were a higher number of people than usual who had a job but were waiting to start or return to work, he notes. Overall, the data will likely reinforce the RBA's view to be cautious about further policy normalization, he adds. (fabiana.negrinochoa@wsj.com)

The South Korean won tumbled around 1,440 per dollar, weighed down by ongoing dollar strength following US President Trump’s renewed tariff threats and the Federal Reserve’s latest meeting minutes.

Trump proposed 25% tariffs on autos, semiconductors, and pharmaceuticals starting as early as April 2 but did not clarify whether they would target specific countries or apply broadly.

Additionally, the Fed minutes signaled no rush to cut interest rates, expressing readiness to hold them steady amid persistent inflation.

Elsewhere, the won found support as optimism grew after US-Russia peace talks on the Ukraine war, signaling a possible end to the conflict.

At home, South Korea’s consumer sentiment rose to a three-month high of 95.2 in February, reflecting improved economic optimism, while producer inflation held at a five-month high of 1.7% in January.

Traders now await the Bank of Korea’s policy decision next week, uncertain if it will adjust rates or maintain its stance.

The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.

0652 GMT - South Korea's benchmark Kospi rose 1.7% to close at 2671.52, extending gains for a seventh consecutive session. Semiconductor and battery stocks led the gains. Foreign and institutional investors were net buyers. Chip stock gains on Wall Street overnight supported investor sentiment. Memory-chip makers Samsung Electronics and SK Hynix rose 3.2% and 4.0%, respectively. Samsung's planned share cancellation also kept the index-heavyweight stock higher for a second consecutive session. Electric-vehicle battery maker LG Energy Solution added 4.4%. USD/KRW settled 0.4% lower at 1,438.50 in Seoul onshore trading. South Korea's 10-year government bond yield was up 0.1 basis point at 2.879%. (kwanwoo.jun@wsj.com)

0649 GMT - The improved investor assessment seen in Germany's ZEW sentiment index released Tuesday in part "reflects increased expectations of ongoing European Central Bank rate cuts," say Daiwa Capital Markets Research analysts. Rate cuts are likely to go "perhaps into accommodative territory," they say in a note. Investors' expectations for the next six months rose 15.7 points on the month in February to 26.0, the indicator's biggest increase in two years. "And with luck, that improved investor mood will translate itself into a pickup in business survey indicators, such as the Ifo indices as well as firmer demand in the real economy," they added. Money markets price in three more ECB rate cuts of 25 bps each this year, bringing the deposit rate to 2.00% by September, according to LSEG. (emese.bartha@wsj.com)

0635 GMT - BlackRock goes tactically--or short-term--overweight eurozone government bonds, reinforcing its preference for them due to tariff risks, it says in a note. Meanwhile, it stays underweight long-term U.S. Treasurys, it says. Persistent deficits and inflation in the U.S. make BlackRock more positive on fixed-income assets elsewhere, notably Europe, it says. U.S. President Trump has signaled potential tariffs on Europe. Europe's reliance on the U.S. as an export destination means tariffs would hurt the eurozone's growth more than it boosts inflation, BlackRock says. (emese.bartha@wsj.com)

0631 GMT - The Reserve Bank of New Zealand's dovish guidance indicates potential for further, faster cuts through 2025, but there is a risk of a slowdown in the pace of easing too, Nomura analysts say. RBNZ guidance on the official cash rate signals scope for cuts through 2025 if conditions evolve as projected, Yusuke Miyairi and others say. They forecast 50bp and 25bp cuts in April and May, but see room for a more hawkish RBNZ. Asked about the pace of future cuts, Gov. Orr mentioned that the bank assumes 25bp cuts in April and May, they note, adding that the OCR is now 25bp above the upper bound of the estimated neutral range. U.S. tariff uncertainty may also lead to a more cautious approach if there is a larger-than-expected adverse growth impact, they add. (fabiana.negrinochoa@wsj.com)

0617 GMT - The Reserve Bank of New Zealand's latest rate cut could well be the last 50-basis-point reduction it makes this cycle, with the size of cuts potentially decreasing from here, UOB economist Lee Sue Ann says. The RBNZ reiterated its expectation that the economy will recover modestly this year, with annual headline inflation forecast to remain on target, she says in a note. It suggested further scope to lower the official cash rate, with the latest forward guidance signaling the average OCR falling to 3.14% by December, Lee says. "With the OCR now much closer to neutral and the economy recovering slowly, we expect a more cautious RBNZ from here." For now, UOB looks for a further 75 bps of rate cuts at a 25bp clip for the rest of the year. (fabiana.negrinochoa@wsj.com)

0514 GMT - The Reserve Bank of New Zealand slashed interest rates and lowered its projections for the path of the official cash rate for the year at its policy meeting. However, the central bank could end up cutting even more, says Jarrod Kerr, chief economist at Kiwibank. Kerr sees risks tilted to the downside for the OCR, as unemployment is still rising and inflation is stable. If anything, the RBNZ may need to stimulate more, by putting the economy in drive and tapping the accelerator, cutting the OCR below 3% from 3.75% now, Kerr adds. (james.glynn@wsj.com; @JamesGlynnWSJ)

South Korea's benchmark Kospi rose 1.7% to close at 2671.52, extending gains for a seventh consecutive session. Semiconductor and battery stocks led the gains. Foreign and institutional investors were net buyers. Chip stock gains on Wall Street overnight supported investor sentiment. Memory-chip makers Samsung Electronics and SK Hynix rose 3.2% and 4.0%, respectively. Samsung's planned share cancellation also kept the index-heavyweight stock higher for a second consecutive session. Electric-vehicle battery maker LG Energy Solution added 4.4%. USD/KRW settled 0.4% lower at 1,438.50 in Seoul onshore trading. South Korea's 10-year government bond yield was up 0.1 basis point at 2.879%. (kwanwoo.jun@wsj.com)