A look at the day ahead in the US and global markets by Mike Dolan
A bizarre 24-hour period in which the world’s twelfth-largest economy briefly introduced martial law had markets pondering the geopolitical risks next year as they waited for a decisive vote, or at least a steer, on the question whether the Federal Reserve would implement easing this month.
While the French government faces a vote of confidence in parliament on Wednesday, South Korea took on a different kind of policy yesterday: local markets were shaken and security transactions in US government bonds and the dollar were briefly put under pressure.
President Yoon Suk Yeol said on Wednesday he would revoke the martial law declaration he imposed hours earlier to universal shock. He would withdraw in a standoff with parliament, which rejected his proposal and then proceeded to impeach him.
The won recovered from a two-year low as the decree was reversed, recouping most of Tuesday’s 2.5% decline, but Seoul’s KOSPI index ended 1.4% lower today. The country’s financial officials said all efforts would be made to support markets and currency intervention would likely be used.
While Yoon pushed back, his move against what he described as “anti-state forces” will upset those who fear a shift in the geopolitical calculus more broadly as Donald Trump’s new administration takes office in January.
Although Yoon did not mention a specific threat from North Korea, instead focusing on his domestic political opponents, it was the first time since 1980 that South Korea declared martial law.
In Europe, French Prime Minister Michel Barnier’s inability to reach a compromise on his cost-cutting 2025 budget could see the first French government forced to resign by a vote of no confidence in more than sixty years. The debate will start at around 3pm GMT (1000 ET) and will last approximately four hours.
Markets were relatively calm ahead of the vote, with the French-German government bond spread narrowing to 82 basis points, while nominal yields rose somewhat in both countries. The French benchmark stock index CAC40 was slightly higher on the day and the euro was stable against a strong dollar.
Back in the United States, market attention turns to Fed Chairman Jerome Powell, who will be interviewed by the New York Times later in the day.
In an important week for US labor market updates, Fed policymakers were unclear this week about their support for another rate cut on December 18.
Futures this week shifted to a more than 70% chance of a quarter-point cut this month, and Powell – who will also be considering his own role under a new Trump administration – could provide a clearer picture of what the central bank sees.
Treasury yields rose again after the first U.S. employment report of the week.
While job openings rose more than expected in October and layoffs declined, the Job Openings and Labor Turnover Survey (JOLTS report) also found that employers were hesitant to hire more workers.
ADP’s private sector figures for November will be released later, along with key services sector surveys, all leading up to Friday’s national employment report.
A Reuters survey of economists estimated that labor costs rose by 200,000 jobs last month, after rising by just 12,000 in October, the lowest since December 2020. The unemployment rate is expected to rise from 4.1% in October to 4.2%.
The dollar index was slightly higher thanks to firmer government bond yields and political unrest abroad. Stock futures on Wall Street also rose before the bell after a flat Tuesday that reached near-record highs.
Shares in Salesforce rose more than 10% in pre-market trading following the overnight earnings beat and robust revenue forecast.
Elsewhere, Chinese shares fell again after a disappointing services survey last month and the latest salvos on investment curbs with the United States.
With Trump’s tariff hikes looming, Beijing banned exports to the United States of critical minerals with widespread military applications, a day after Washington’s latest crackdown on China’s chip sector.
Four of China’s top industry associations said Chinese companies should be wary of buying American chips because they are “no longer safe” and should buy locally instead.
The offshore yuan held steady after hitting a 2024 low on Tuesday.
Key developments that should give more direction to US markets later on Wednesday:
* US private sector payrolls from ADP in November, service sector surveys from ISM and S&P Global in November, factory orders in October; Brazil industrial production in October; Productivity Canada Q3
* Fed Chairman Jerome Powell, St. Louis Fed President Alberto Musalem and Richmond Fed chief Thomas Barkin all speak; Christine Lagarde, President of the European Central Bank, speaks
* Fed publishes Beige Book on economic conditions
* US corporate profits: Synopsys, Dollar Tree, Campbell’s, Hormel Foods
(By Mike Dolan,; mike.dolan@thomsonreuters.com)
