(Bloomberg) — Stocks in Asia are set for a mixed open after South Korean President Yoon Suk Yeol’s shock decision to impose martial law for the first time in more than 40 years, only to reverse course hours later, caught global markets off guard.
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Equities opened lower in Sydney, while futures pointed to a gain in Tokyo and a decline in Hong Kong. S&P 500 contracts were steady after the index closed little changed. South Korean-related ETFs, its currency and most actively traded stocks all dropped after Yoon stunned investors by declaring martial law on Tuesday, before regaining some lost ground.
“Markets interpreted developments as being a domestic political issue but nevertheless, it was a reminder of elevated political risk globally,” ANZ Group Holdings Ltd. analysts Brian Martin and Daniel Hynes said in a note. “Volatility may intensify when local markets open today.”
The iShares MSCI South Korea exchange-traded fund sank as much as 7.1% in US trading, while London-listed shares of Samsung Electronics lost as much as 7.5%. The onshore Korean won weakened as much as 2.9%, leading losses among currency markets.
The nation’s stock market will open as usual on Wednesday, the finance ministry said. Bank of Korea’s monetary board, which unexpectedly cut the key rate last week, will hold an extraordinary meeting to discuss steps to shield the economy and markets.
The surprise move by a major economy and pillar of global trade increased caution on Wall Street, where the S&P 500 edged higher to notch its 55th record this year. Investors are looking to this week’s key jobs data and Jerome Powell’s remarks for clues on whether the Federal Reserve will cut rates in December.
Just a few days ahead of the US payrolls report, data showed job openings picked up while layoffs eased, suggesting demand for workers is stabilizing. Fed Bank of San Francisco President Mary Daly said a rate cut this month isn’t certain, but remains on the table.
“The question for investors isn’t ‘will the Fed cut again’ but rather ‘will the next cut be in December or January’,” said Lauren Goodwin at New York Life Investments. “Our base case is that the Fed cuts 25 basis points in December, but we have much higher confidence that another cut is coming in December or January as the data evolves.”
The S&P 500 was little changed on Tuesday. The Nasdaq 100 added 0.1%. Treasury 10-year yields advanced four basis points to 4.22%. Oil rose as the US imposed more sanctions targeting Iranian crude and OPEC+ made progress on a deal to keep output off the market.