Morning Bid: Political Storms Sap Sentiment
Warren Takunda
2024-12-04Political unrest in Europe and South Korea hits markets, with French no-confidence votes looming and Korea facing calls to impeach its president.
Political turmoil moves to Europe as French lawmakers gear up to vote on no-confidence motions on Wednesday that could topple the fragile coalition government. Earlier in the day in Asia South Korean politicians called for the impeachment of President Yoon Suk Yeol after a failed martial law bid jolted markets.
French bond futures are weak as are European futures , while the euro remains not far off a two-year low it touched in November, ahead of the crucial vote for the eurozone's second-biggest economy.
PMI data from the region will also provide more clarity on how the economies are faring.
Investors have punished French assets during the political crisis, with the spread between French bonds and the German benchmark widening further and a sell-off in the euro gathering pace.
Since President Emmanuel Macron called snap elections in early June, France's CAC 40 has dropped nearly 10% and is the heaviest loser among top EU economies. The single currency is down nearly 4% in the same period.
The gap between French and German 10-year bond yields has hit its highest since 2012 over concerns about France's budget
Over in Asia, the spotlight was firmly on South Korea after president Yoon declared martial law only to reverse the move hours later, triggering the biggest political crisis in decades in Asia's fourth-largest economy.
A coalition of lawmakers from opposition parties said they planned to propose a bill to impeach Yoon on Wednesday which should be voted within 72 hours.
The political brouhaha has come at the absolutely wrong time for Korean assets which are already the laggards in the region. The benchmark Kospi Index is down nearly 2% on the day, taking its 2024 losses to 7.5%, easily the worst performing major Asian stock market.
The S&P 500 and NASDAQ eked out record closing highs on Tuesday, with tech-related shares extending recent gains.
The South Korean won was stable in Asian hours after dropping steeply overnight when the martial law was first announced, but the stability was suspected to be engineered by authorities.
It has dropped 9% versus the dollar this year, the region's worst performer. The finance ministry said on Wednesday it was ready to deploy "unlimited" liquidity into financial markets.
Elsewhere, The Australian dollar dropped more than 1% to a four-month low after weaker-than-expected economic growth boosted the case for earlier rate cuts by the central bank there.
Source: Reuters
