Asian Markets Wary As Political Tensions Rise: Markets Collapse

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(Bloomberg) — Asian stocks were poised for a mixed opening on Monday as traders grappled with continued political upheaval in South Korea and awaited signs of fresh stimulus from Beijing. Oil was steady after the Syrian government was toppled. 

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Australian stocks and equity futures in Hong Kong fell while those in Japan and mainland China climbed. US contracts were little changed after the S&P 500 advanced on Friday following a jobs report indicating the labor market is cooling enough to allow the Federal Reserve to cut interest rates this month. The dollar was steady against major peers in early trading.

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Investors are bracing themselves this week for the final series of central bank decisions on all four continents, a key meeting of Chinese officials and US inflation data in an effort to capture annual gains and help guide positions in 2025. has returned more than 20% this year, on track for its second straight gain, according to data compiled by Bloomberg.

“It’s going to be a great week with the risk of a market-wide event,” said Chris Weston, head of research at Pepperstone Group Ltd. in Melbourne writing for clients. “The hot print of the US CPI may not necessarily affect tapering at next week’s FOMC meeting” but it could trigger the idea of ​​further easing and take the dollar off.

In Asia, South Korean stocks may be on the move as some lawmakers call for President Yoon Suk Yeol to step down amid growing public anger over the brief imposition of martial law last week. Opposition lawmakers said they would push for another impeachment vote against Yoon after the first one failed.

Meanwhile, the People’s Bank of China’s daily yuan fix will be split after the central bank signaled its support for the currency through a series of tough measures last week. That comes ahead of consumer and producer price data that could point to weak demand in the world’s second-largest economy and add to expectations of more monetary support from the Central Economic Work Conference due to start on Wednesday.

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“There is a strong case to be made that China has been keeping its powder dry pending US trade policy changes since January,” Barclays strategists led by Themistoklis Fiotakis wrote in a note to clients. Assuming that there is scope for some dollar depreciation, “downward pressure on the yuan should also reduce the PBOC’s resistance temporarily by about 7.30” per dollar.

Middle East

Crude was little changed after Saudi Arabia cut consumer prices in Asia more than expected after OPEC+ again delayed production increases. Movements could be disrupted as markets assess the fallout from the overthrow of Syrian President Bashar al-Assad’s government by opposition parties, a major blow to key backers Russia and Iran that is likely to transform the region as conflicts continue.

Treasuries extended their recent gains on Friday, as investors found relief from the sell-off that took place in November as Donald Trump’s presidential victory raised inflation risks. Since then, however, yields have fallen sharply on speculation that the Fed will cut policy again at this month’s meeting, the last time before Trump takes office, as he tries to steer the economy into softer territory.

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Responding to potential tensions between the incoming administration and the US central bank, Trump told NBC’s Meet the Press on Sunday that he has no plans to replace Fed Chairman Jerome Powell once he returns to the White House. Markets are now pricing in a nearly 80% chance that the Fed will cut at its December meeting, although officials have warned against the pace of further cuts.

The Fed’s projections already suggest a slight pace of easing “however slow and likely to be a temporary cut,” Societe Generale economists including Klaus Baader said in a note to clients. “We expect a 25 basis point cut at the December FOMC meeting but that also depends on the upcoming CPI.”

Elsewhere this week, Australia’s central bank is likely to keep interest rates on hold amid signs the country’s economy is beginning to soften. The European Central Bank, the Bank of Canada and the Swiss National Bank are expected to ease policy, while Brazil’s central bank may hike to contain inflationary pressures.

In other commodities, gold rose sharply in early trade on Monday after China’s central bank increased its holdings of gold in November, ending a six-month freeze on purchases.

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Important events this week:

• Japan GDP, current account, Monday
• China PPI, CPI, Monday
• Mexico CPI, Monday
• Australia’s rate decision, Tuesday
• German CPI, Tuesday
• Brazil CPI, Tuesday
• Japan PPI, Wednesday
• Chinese leaders are expected to hold the annual Central Economic Forum, from Wednesday to Dec. 12
• RBA Deputy Governor Andrew Hauser speaks, on Wednesday
• US CPI, Wednesday
• Canadian-level decision, Wednesday
• Rate decision for Brazil, Wednesday
• Unemployment in Australia, Thursday
• India CPI, Thursday
• Eurozone ECB rate decision, Thursday
• Swiss standard decision, Thursday
• France CPI, Friday
• Eurozone industrial production, Friday

Some of the main steps in the market:

Shares

• S&P 500 futures were little changed as of 8:16 am Tokyo time
• Hang Seng futures down 0.6%
• Australia’s S&P/ASX 200 fell 0.4%

Funds

• The Bloomberg Dollar Spot Index rose 0.2%
• The euro was little changed at $1.0566
• The Japanese yen was little changed at 149.94 per dollar
• The onshore yuan was little changed at 7.2800 per dollar
• The Australian dollar rose 0.1% to $0.6400

Cryptocurrencies

• Bitcoin rose 0.4% to $100,443.18
• Ether rose 0.1% to $3,998.83

Bonds

• Australia’s 10-year yield fell one basis point to 4.21%

Goods

• West Texas Intermediate crude was little changed
• Local gold rose 0.3% to $2,641.65 an ounce

This story was produced with the help of Bloomberg Automation.

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