Asian Stock Markets Stumble on South Korean Political Uncertainty

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Asian equities faced a setback on Wednesday, and currencies experienced volatility as traders grappled with the political turmoil in South Korea, where martial law was imposed and quickly lifted.

The South Korean won initially strengthened due to suspected intervention but remained near the two-year low against the dollar it reached on Tuesday. Charu Chanana, chief investment strategist at Saxo, noted that while the political uncertainty in South Korea could spur a flight to safety, the swift actions of Korean authorities are likely to limit the market impact.

This political upheaval in East Asia added to global concerns, with investors already rattled by political instability in France, which has been affecting the euro.

The euro was down 0.11% at $1.04975, and French bond futures fell 0.13%. European stock futures also dropped by 0.14% ahead of a critical no-confidence vote in the French parliament, which is expected to end the fragile coalition government of Prime Minister Michel Barnier.

Carol Kong, currency strategist at Commonwealth Bank of Australia, suggested that if the government collapses, emergency legislation could be adopted to avoid a shutdown, potentially causing further pressure on the euro.

On the economic front, investors are awaiting more indicators to understand the Federal Reserve's policy direction for the coming year, with the November employment report scheduled for release on Friday. U.S. job openings saw a solid increase in October, while layoffs dropped to their lowest level in 18 months, indicating that the labor market is slowing down in an orderly manner, although there are signs that employers are cautious about hiring.

Markets are pricing in a 72% chance of a 25 basis point rate cut this month, with 80 basis points of cuts anticipated by the end of next year. U.S. central bankers believe inflation is heading toward their 2% target and have shown support for further rate cuts, although no clear consensus on the timing has emerged.

The dollar index, which tracks the U.S. dollar against six major currencies, rose 0.12% to 106.45, while gold prices slipped 0.17% to $2,639 due to the stronger dollar. Oil prices remained steady after a 2% gain the previous day, as investors anticipated a potential extension of OPEC+ supply cuts, amid Israel's warning to attack Lebanon if its truce with Hezbollah collapses.

Paraphrasing text from "Reuters" all rights reserved by the original author.