Global investors reacted to an abrupt U.S. move to raise tariffs on South Korea from 15% to 25% with surprisingly calm buying across equity markets, even as the measures target autos, lumber and pharma. The surprise announcement initially pushed South Korea's KOSPI down by more than 1%, but buyers stepped in and the market later rallied about 2% to reach record highs.
Traders attributed some of the market resilience to expectations of de-escalation. South Korea's Industry Minister is scheduled to travel to the U.S. soon, and market participants were betting that the dispute may be resolved - or at least softened - in negotiations. Some traders summed up the market's stance with the shorthand "TACO - Trump always chickens out," reflecting a belief that the tariff threat may not be sustained.
Analysts also noted a structural reason Seoul is not rushing to redirect massive investments to the U.S. when the possibility of arbitrary tariffs remains a recurring policy risk under the current administration. That ongoing uncertainty, however, boosted demand for safe-haven assets: precious metals enjoyed notable gains, with gold climbing 1% to $5,063 an ounce and silver jumping 5% to $109 an ounce.
Across Asia, equities were broadly upbeat in part due to optimism that strong corporate earnings from the so-called U.S. Magnificent Seven - beginning with Meta, Microsoft and Tesla on Wednesday - could help carry the regional rally into the next year. MSCI's broadest index of Asia-Pacific shares outside Japan rose 1% to a fresh record high. Japan's Nikkei advanced 0.7% despite the yen trading near its strongest level in over two months, a movement that is typically viewed as a headwind for exporters.
European markets were positioned for a firmer start, with EURO STOXX 50 futures up 0.3%. U.S. futures also showed gains ahead of the session: Nasdaq futures rose almost 0.6%, while S&P 500 futures were up about 0.3%.
The economic calendar looks light until the Federal Reserve's policy decision on Wednesday, where the market expects no change to interest rates. The Fed meeting is likely to be dominated by the implications of a Department of Justice investigation into Chair Jerome Powell, which could shape the tone of the post-meeting press conference. The report noted that Powell could, under Fed rules, discuss the option of not stepping down as a governor in May; how that possibility might affect reactions from the White House was described as uncertain.
Key events that could influence markets on Tuesday include earnings reports from LVMH Moet Hennessy Louis Vuitton and Christian Dior, the U.S. ADP Weekly Employment Change, and the Conference Board's January Consumer Confidence reading.
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Takeaway - Markets demonstrated a preference for buying the dip, with equities and precious metals rising despite tariff escalation. Investors remain focused on upcoming earnings and the Fed decision amid political and regulatory uncertainties.