In South Korea, Asia’s fourth-largest economy, lawmakers called on President Yoon Suk Yeol to resign or face impeachment after he declared martial law late yesterday only to reverse the move hours later.
The crisis left South Korea’s benchmark KOSPI index down 1.4%, taking its year-to-date losses to over 7% and making it the worst-performing major stock market in Asia this year.
In turn, MSCI’s broadest index of Asia-Pacific shares outside Japan, which counts Samsung Electronics as one of its top constituents, was mostly flat.
Most Asian markets aside from South Korea rose.
The won currency, buoyed by suspected central bank intervention, was stable but remained close to the two-year low against the dollar that it hit late yesterday.
South Korea’s finance ministry said it was prepared to deploy unlimited liquidity into financial markets.
Reports said the financial regulator was ready to deploy ₩10 trillion (US$7.1 billion) in a stock market stabilisation fund.
“Martial law itself has been lifted, but this incident creates more uncertainty in the political landscape and the economy,” said ING senior economist Min Joo Kang.
Meanwhile, in Europe, stocks edged up 0.2% and the euro traded near a two-year low ahead of the no-confidence vote in France, where the blue-chip CAC 40 was up 0.4%.
French lawmakers will vote later in the day on motions which are all but certain to oust the fragile coalition of Prime Minister Michel Barnier, deepening the political crisis in the euro zone’s second-largest economy.
The single currency, last at US$1.0501, is down 4% since the start of November, when investors already bracing for any widely expected tariff-heavy policies from the incoming administration of President-elect Donald Trump.
“The general sense is that this vote could be successful. If so, there isn’t an obvious route forward on what happens next.” Deutsche Bank analysts wrote.
French government bonds were steady.
Wall Street futures pointed to gains, with S&P 500 e-mini futures gaining 0.2% to hit a record high.
US policy path
Away from political turmoil, investors are hoping for more cues to gauge the policy path the Federal Reserve (Fed) will likely take next year, with a much-anticipated November employment report due on Friday.
US job openings increased solidly in October while layoffs dropped by the most in 1-1/2 years, data showed yesterday, suggesting the labour market is slowing even as another survey showed employers were hesitant to hire more workers.
Markets are now ascribing a 72% chance of a 25 basis point cut this month, with 80 bps of cuts expected by the end of next year.
The spotlight now turns to Fed chair Jerome Powell, who will give today what are expected to be his last public remarks ahead of the meeting.
In currencies, the dollar index, which measures the US currency against six rivals, was up 0.2% at 106.5.
The Australian dollar fell to four-month lows as surprisingly soft economic data led markets to bring forward the likely timing of future rate cuts.
Oil prices firmed as market participants weighed up geopolitical tensions and the prospect of Opec+ extending supply cuts against weaker demand.
Brent crude futures rose 0.2% to US$73.82 a barrel, while US West Texas Intermediate crude futures added 0.2% to US$70.07.