Mike Dolan provides an update on the US and global markets for the day ahead.
A bizarre 24-hour period in which the world’s 12th largest economy briefly introduced martial law left markets pondering next year’s geopolitical risks, while awaiting a decisive vote, or at least direction, on the issue to know if the Federal Reserve will relax its working conditions this month.
As the French government faces a vote of confidence in Parliament on Wednesday, politics of a different nature took over in South Korea yesterday, shaking local markets and briefly spurring security trading in U.S. Treasuries and the dollar.
President Yoon Suk Yeol said Wednesday he would lift the martial law declaration he imposed to universal shock just hours earlier, backtracking in a standoff with parliament, which rejected his move and then moved to reverse it. remove.
The won rebounded from a two-year low when the decree was reversed, recovering most of Tuesday’s 2.5% plunge, but Seoul’s benchmark KOSPI ended 1% lower. .4% today. The country’s financial officials said every effort would be made to support markets and intervention in the foreign exchange market was likely.
Although Yoon has reversed course, his action against what he described as “anti-state forces” is sure to worry those who fear a shift in geopolitical calculations upon taking office. of the new administration of Donald Trump in January.
Although Mr. Yoon did not cite a specific threat from North Korea, instead focusing on his domestic political opponents, this is the first time martial law has been declared in South Korea since 1980 .
In Europe, French Prime Minister Michel Barnier’s failure to secure a compromise on his cost-cutting 2025 budget could lead to the fall of France’s first government with a vote of no confidence in more than 60 years. The debate begins around 1500 GMT (1000 ET) and is expected to last around four hours.
Markets were relatively calm ahead of the vote, with the spread between French and German government debt compressing to 82 basis points as nominal yields in both countries rose slightly. The French CAC40 stock index rose slightly and the euro remained stable against a firm dollar.
Back in the United States, the spotlight turns to Fed Chairman Jerome Powell, who will be interviewed by the New York Times later today.
In an important week for U.S. labor market updates, Fed policymakers speaking so far this week have been equivocal about their support for further interest rate cuts on December 18.
Futures have moved this week to put the odds of a quarter-point cut this month at more than 70% and Mr Powell – who will also consider his own role under a new Trump administration – could give a clearer picture of what the central bank sees.
Treasury yields started to rise again after the publication of the first weekly employment report in the United States.
While job openings rose more than expected in October and layoffs declined, the Job Openings and Labor Turnover Survey (JOLTS) report also showed that employers were hesitant to hire more workers.
ADP’s private sector employment figures for November are due to be released later, along with the main service sector surveys, and all of this comes ahead of the national employment report from Friday.
According to a Reuters survey of economists, the number of jobs rose by 200,000 last month, following a rise of just 12,000 in October, the smallest since December 2020. The unemployment rate is expected to rise to 4,000. 2%, compared to 4.1% in October.
The dollar index was slightly higher on rising Treasury yields and overseas political fears, and Wall Street stock futures were also up before the bell after a near flat Tuesday record highs.
Shares of Salesforce rose more than 10% premarket after reporting higher earnings than the day before and a strong revenue forecast.
Elsewhere, Chinese stocks fell again after a disappointing services sector survey for last month and after the latest salvos of investment curbs with the United States.
Facing the threat of higher tariffs from Trump, Beijing banned exports to the United States of essential minerals with numerous military applications, a day after the latest crackdown by Washington on against the Chinese microchip sector.
Four of China’s major industry associations said Chinese companies should be wary of U.S. chips because they are “no longer safe” and buy local products instead.
The offshore yuan stabilized after hitting a 2024 low on Tuesday.
The main developments expected to steer US markets later on Wednesday:
* Private sector employment figures (ADP), service sector surveys (ISM and S&P Global), orders for manufactured goods (October), industrial production (October) in Brazil, productivity ( third trimester) in Canada.
* Federal Reserve Chairman Jerome Powell, St. Louis Fed President Alberto Musalem and Richmond Fed Chief Thomas Barkin speak; the President of the European Central Bank Christine Lagarde speaks.
* Fed publishes Beige Book on economic conditions
* Results of American companies: Synopsys, Dollar Tree, Campbell’s, Hormel Foods
