Asian Stocks Slip amid South Korean Political Turmoil

Asian equities declined, with South Korea's KOSPI index (.KS11) dropping nearly 2%, extending its year-to-date losses to over 7%, marking it as Asia's worst-performing major stock market this year.

The MSCI Asia-Pacific shares index outside Japan (.MIAPJ0000PUS) fell 0.32%, weighed down by losses in Samsung Electronics (005930.KS), one of its key constituents.

South Korea's won strengthened in early trading, supported by suspected intervention, but stayed near its two-year low against the dollar reached on Tuesday.

President Yoon Suk Yeol rescinded a surprise martial law declaration hours after imposing it, following parliamentary opposition to the measure aimed at curbing political activity.

"Martial law itself has been lifted, but this incident creates more uncertainty in the political landscape and the economy," said Min Joo Kang, senior economist at ING.

She warned of potential risks to South Korea's sovereign credit rating, though the outlook remains uncertain.

The finance ministry pledged "unlimited" liquidity support if needed, while Yonhap reported the financial regulator's readiness to inject 10 trillion won ($7.07 billion) into a stock market stabilization fund. A press conference was scheduled for 0120 GMT.

"Korean authorities appear to be moving swiftly to stabilize markets, and the impact is likely to be short-lived," said Charu Chanana, chief investment strategist at Saxo.

Global markets showed mixed reactions to the developments in South Korea. Political turmoil in France further pressured the euro, which dipped 0.11% to $1.04975.

French bond futures slid 0.13%, while European stock futures fell 0.14%, as lawmakers prepared to vote on no-confidence motions likely to topple Prime Minister Michel Barnier's coalition government.

"If the government collapses, emergency legislation could avert a shutdown, but the spread between French and German bond yields may widen, adding strain to the euro," noted Carol Kong, currency strategist at Commonwealth Bank of Australia.

Investors turned their focus to US Federal Reserve signals, with Friday's employment report expected to offer clues about the central bank's policy path.
October data showed solid job openings and reduced layoffs, though employers remain cautious about hiring.

Markets currently assign a 72% chance of a 25 basis-point rate cut this month, with an additional 80 basis points anticipated by year-end 2024.

Federal Reserve Chair Jerome Powell is set to deliver his final remarks ahead of the next policy meeting in two weeks.

The dollar index rose 0.12% to 106.45, while gold prices eased 0.17% to $2,639 as the strong dollar weighed on the metal.

Oil prices held steady after a 2% rise in the previous session, as tensions between Israel and Hezbollah heightened and investors awaited OPEC+ decisions on extending supply cuts.