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Bank of Korea cuts rates amid growth concerns

The Bank of Korea cut its interest rate to 2.75% on Tuesday, citing economic growth concerns, which led to a decline in South Korea's Kospi index and the won. Asian markets were trading broadly lower on Tuesday, with sentiment influenced by Trump's tariff threats. US stocks remained weak despite a slight gain in the Dow to kick off the week, while German stocks surged following a conservative election win. In macroeconomics, eurozone inflation rose to 2.5%, questioning the speed of the European Central Bank's (ECB) expected rate cuts.

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Shane Strowmatt, LGT
Reading time
5 minutes

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The Bank of Korea reduced its interest rate by 25 basis points to 2.75% on Tuesday, the lowest since August 2022, amid concerns over economic growth. This marks the third rate cut in four meetings and aligns with economists' expectations. The central bank also lowered its 2025 growth forecast to 1.5% from 1.9%, citing weaker domestic demand and export growth. Following the announcement, South Korea's Kospi index fell 0.5%, and the won weakened 0.2% against the US dollar. Other Asian equity markets were trading in the red across the board on Tuesday as Trump’s tariff threats dampened sentiment. Japan’s Nikkei 225 was trading 1.3% lower, and Australia’s S&P/ASX 200 was down 0.7%. Hong Kong’s Hang Seng Index dropped 0.8%, and mainland China’s CSI 300 was trading 0.6% lower.

US stocks remain weak despite slight Dow gain

US stock markets showed little recovery on Monday following Friday's significant losses. The Dow Jones Industrial closed up 0.1% at 43,461.21 points, barely offsetting its 1.7% drop from Friday. The S&P 500 fell by 0.5% to 5,983.25 points, dropping below 6,000 for the first time in nearly three weeks, while the Nasdaq-100 declined by 1.2% to 21,352.08 points. Nvidia's shares fell 3% ahead of its earnings report on Wednesday.

German stocks surge after conservative election win

German stocks rose significantly on Monday after Friedrich Merz's conservative party won the national election. The DAX index increased by 0.6%, driven by defence stocks. Defence companies Rheinmetall (+6.4%), Hensoldt (+4.6%), and Renk (+3%) saw gains on expectations of higher military spending under the new administration. Meanwhile, the pan-European STOXX 50 index dropped 0.5% on Monday.

German business climate remains unchanged

The ifo Business Climate Index for Germany stayed at 85.2 points in February, reflecting ongoing scepticism among companies. While satisfaction with current business conditions slightly declined, future expectations showed some improvement. The manufacturing sector saw a better business climate due to stabilised order books, whereas the service sector experienced a decline, particularly in transport and logistics.

Eurozone inflation rises to 2.5%

Annual inflation in the eurozone increased to 2.5% in January 2025, up from 2.4% in December 2024, according to Eurostat on Monday. The European Union's inflation rate also rose to 2.8% from 2.7% over the same period. Inflation excluding energy was 2.6% in the eurozone for January 2025. The uptick in inflation was primarily driven by services, which contributed significantly to the overall rate. The increase pushes inflation further away from the ECB’s 2% target, but the market still expects the central bank to confidently continue with rate cuts.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Fresenius Medical Care, Home Depot, Intuit, PSP Swiss Property, and SIG Combibloc. Annual general meeting at Apple.

Economic data in focus: German gross domestic product (08:00), Conference Board Consumer Confidence Index (16:00), Richmond Fed Manufacturing Index (16:00).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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