Asian Stocks Fall as Political Chaos Rattles Korea: Markets Wrap

(Bloomberg) — Stocks in Asia declined after South Korea’s political turmoil triggered by a brief imposition of martial law put investors on edge. 

The MSCI Asia Pacific Index was down 0.3%, with the Kospi Index falling as much as 2.3%. Shares were mixed in Japan and traded lower in mainland China. The won advanced after tumbling overnight in offshore trading. 

South Korean President Yoon Suk Yeol’s sudden declaration of martial law late Tuesday — which was later revoked — looks set to thrust the nation into a period of political unrest, with the opposition now pushing for his impeachment. The uncertainties surrounding a major economy and pillar of global trade increased caution among investors in Asia, at a time when Donald Trump’s imminent return and China’s economic woes have already hurt sentiment. 

“The situation remains dynamic and evolving and markets could continue to experience volatility as the existing cabinet is likely to be reshuffled and a possible impeachment process could be evaluated,” said David Chao, global market strategist at Invesco in Singapore. Still, the developments are “unlikely to have any lasting effects on the economy and financial markets.”

US equity futures climbed, as traders shifted their focus to Jerome Powell’s remarks and Friday’s payrolls report for clues on whether the Federal Reserve will cut rates in December. Data due later Wednesday on services and manufacturing will give an indication on the economy’s health, after US job openings picked up in October while layoffs eased. Fed Bank of San Francisco President Mary Daly said a rate cut this month isn’t certain, but remains on the table. 

Treasury 10-year yields were little changed at 4.22% after rising three basis points in the previous session. A Bloomberg gauge of the dollar held steady. 

The euro edged higher against the greenback with all eyes on the political standoff in France. President Emmanuel Macron called on French lawmakers to set aside their personal ambition and reject a vote that would topple the government.

Back in Asia, investors are assessing what’s next for South Korea after the opposition Democratic Party said it will pursue charges of treason and impeachment against Yoon for declaring martial law illegally. The Bank of Korea said it will increase short-term liquidity and take “active” steps in currency markets as needed to ensure stability.  

“There’s certainly some lingering uncertainty – but the quick response from Korean authorities means that impact on the region could remain limited,” said Charu Chanana, chief investment strategist at Saxo Markets. 

In China, the central bank increased its support for the yuan by setting a significantly stronger-than-expected daily reference rate. The yuan edged higher.

The Aussie dollar slumped after data showed Australia’s economic growth remained sluggish in the three months through September.  

Oil steadied after the biggest advance in more than two weeks. Gold stabilized after rising on Tuesday as political turmoil in South Korea and France buoyed demand for haven assets.

Key events this week:

• S&P Global Eurozone Services PMI, PPI, Wednesday
• US factory orders, US durable goods, Wednesday
• Fed’s Jerome Powell and Alberto Musalem speak, Wednesday
• Fed’s Beige Book, Wednesday
• Eurozone retail sales, Thursday
• US initial jobless claims, Thursday
• Eurozone GDP, Friday
• US jobs report, consumer sentiment, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.1% as of 2:11 p.m. Tokyo time
• Japan’s Topix fell 0.2%
• Australia’s S&P/ASX 200 fell 0.4%
• Hong Kong’s Hang Seng was little changed
• The Shanghai Composite was little changed
• Euro Stoxx 50 futures fell 0.1%
• Nasdaq 100 futures rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index was unchanged
• The euro was little changed at $1.0511
• The Japanese yen fell 0.2% to 149.93 per dollar
• The offshore yuan rose 0.1% to 7.2902 per dollar
• The Australian dollar fell 0.8% to $0.6435

Cryptocurrencies

• Bitcoin was little changed at $96,127.54
• Ether rose 1.7% to $3,676.31

Bonds

• The yield on 10-year Treasuries was little changed at 4.23%
• Australia’s 10-year yield declined three basis points to 4.27%

Commodities

• West Texas Intermediate crude rose 0.2% to $70.10 a barrel
• Spot gold rose 0.2% to $2,648.51 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Cormac Mullen.

©2024 Bloomberg L.P.