In South Korea, Asia’s fourth-largest economy, lawmakers urged President Yoon Suk Yeol to resign or face impeachment after declaring martial law Tuesday night and reversing the move just hours later. The crisis left the benchmark KOSPI index (.KS11) with a fall of 1.4%, and accumulated losses of more than 7% so far this year and consolidated itself as the worst-performing stock market among Asia’s major economies this year.
Consequently, MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), which counts Samsung Electronics (005930.KS) as one of its main components, was flat.
Most Asian markets, with the exception of South Korea, showed progress. The South Korean won, supported by suspected central bank intervention, was steady, although close to a two-year low against the dollar hit late Tuesday.
South Korea’s Ministry of Finance declared that it was prepared to inject unlimited liquidity into financial markets. Reports said the financial regulator was ready to deploy a 10 trillion won ($7.1 billion) stock stabilization fund.
“Martial law has been lifted, but this incident brings more uncertainty to the political and economic landscape,” said Min Joo Kang, senior economist at ING.
Eyes on France
Meanwhile, in Europe, stocks (.STOXX) rose 0.2%, and the euro remained near its lowest level in two years before the no-confidence vote in France. France’s CAC 40 index (.FCHI) rose 0.4%.
French lawmakers will vote later in the day on motions that will almost certainly bring down Prime Minister Michel Barnier’s fragile coalition, deepening the political crisis in the euro zone’s second-largest economy. The single currency, which was trading at $1.0501, has fallen 4% since the beginning of November, when investors were already anticipating possible protectionist policies from US President-elect Donald Trump.
“There is a widespread perception that this vote could be successful,” Deutsche Bank analysts wrote. “If so, there is no clear path as to what happens next.”
French government bonds were stable.
Perspective in the US
Aside from the political turmoil, investors are awaiting new signals to gauge the direction of Federal Reserve policy next year, with the highly anticipated November jobs report due out on Friday.
U.S. job openings rose sharply in October, while layoffs fell to the lowest level in a year and a half, data showed on Tuesday, suggesting the labor market is slowing, although another survey showed employers are reluctant to hire more workers.
Markets now assign a 72% chance of a 25 basis point cut this monthwith a total of 80 basis points of cuts planned for the end of next year. Attention now turns to Fed Chairman Jerome Powell, who will give his final public comments on Wednesday before the next meeting.
Other markets
In the currency market, the dollar index, which measures the US currency against six rivals, rose 0.2% to 106.5.
The Australian dollar falls to four-month lows after surprisingly weak economic data led markets to bring forward the possible timing of future rate cuts.
Oil prices jump as market participants assess geopolitical tensions and the possibility of OPEC+ extending supply cuts in the face of weaker demand. Brent crude futures rose 0.2% to $73.82 a barrel, while U.S. West Texas Intermediate crude futures rose 0.2% to $70.07.
Source: Ambito
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