For investors in the global market, this Wednesday (December 4th) is destined to be a crucial trading day:
On the one hand, after South Korean President Yoon Suk yeol announced "emergency martial law" last night, triggering political turmoil in South Korea, investors during the Asian session will closely focus on every move in the South Korean market;
On the other hand, the European political arena could also explode at any moment, with a vote of no confidence expected to take place on Wednesday against the Barnier government in France. The Barnier government may become the first French government to be forced to step down due to a vote of no confidence since 1962;
Finally, at 2:45 am Beijing time on Thursday during the New York session, Federal Reserve Chairman Powell will be invited to give an interview at the DealBook/Summit conference hosted by The New York Times. This will be his last speech before the silence period of the Fed's December interest rate meeting, and his statement is likely to directly affect people's judgment on whether the Fed will cut interest rates in December!
It can be said that in just one day, Asia, Europe, and the Americas, the three major continents that influence the direction of global financial markets, will all have extremely heavyweight highlights. And where will the stock, bond, and foreign exchange markets go on this' Super Wednesday '? Let's wait and see together
After the martial law scandal, South Korean stocks opened lower
From the performance at the opening on Wednesday, it is not surprising that the South Korean stock market opened lower after a night of political turmoil. The South Korean KOSPI index opened down 1.97% after South Korean President Yoon Seok yeol issued an emergency martial law in the late night, which was not lifted until 6 hours later.
However, in the foreign exchange market, the Korean won has gradually stabilized. The US dollar against the Korean won soared to a high of 1444 overnight after the "emergency martial law" order was issued in South Korea. However, during the Asian session, it recently fell to around 1410 in the morning, and the Korean won has basically recovered more than half of its decline.
South Korean President Yoon Suk yeol suddenly gave a televised speech on Tuesday evening, announcing the implementation of "emergency martial law," a decision that few market participants could have predicted. Yoon Seok yeol cited multiple reasons, stating that the opposition party is manipulating the parliament and disrupting the country, and that they will eliminate the "anti national forces" in South Korea. It is reported that this emergency martial law is the first time in South Korea since 1980.
Until around 4am local time on Wednesday, Yin Xiyue's latest speech lifted martial law, ending the tense night caused by the announcement of martial law. Prior to this, lawmakers had climbed over fences, passed through armed guards, and entered the South Korean National Assembly located in the center of Seoul, opposing the implementation of martial law with a vote of 190 to 0 in the early hours of Wednesday.
Due to a fierce confrontation with the opposition party over budget issues and infighting within the conservative National Power Party over internal political scandals, Yoon Suk yeol's approval rating has now fallen to a new low. Against this backdrop, South Korea staged a series of shocking political earthquakes on Tuesday. According to external analysis, the recent series of legislation against President Yoon Suk yeol's wife and impeachment of public officials such as prosecutors by the opposition party in South Korea may have been the trigger for Yoon Suk yeol's announcement of "emergency martial law".
After this "emergency martial law" farce, Yoon Suk yeol's presidency may become increasingly precarious. The largest opposition party in South Korea, the United Democratic Party, urged President Yoon Suk yeol to step down immediately on the 4th. The Democratic Party also stated that if Yoon Suk yeol does not resign voluntarily, the impeachment process will be pushed forward.
The Democratic Party made this decision on the same day after convening an emergency congress of members in Congress. The Joint Democratic Party stated that "President Yoon Suk yeol's announcement of emergency martial law is a clear violation of the Constitution, as he did not comply with any of the conditions necessary for the announcement
After opening lower in the day, the performance of the South Korean stock market in the remaining time of the day is clearly still worth investors' close attention. It is worth mentioning that despite the overnight storm caused by this political earthquake, some market participants actually believe that it may bring trading opportunities. Graham Ambrose, Managing Director of Goldman Sachs London Stock Chartered Sales Team, told clients that "there may be buying opportunities in Seoul (Korean market) in the next few days," and he particularly advised clients to pay attention to stocks with short-term mismatches.
The French government faces a vote of no confidence
The political turmoil in South Korea last night came quite suddenly, while on the other side of the Eurasian continent, the political turmoil in France has actually been raging for over a week. And today, it is clear that it will also be a decisive moment affecting French politics: can the Barnier government "survive" in the vote of no confidence?
French parliamentarians will begin debating the motion of no confidence at 4 pm local time on Wednesday (23:00 Beijing time), followed by the official vote. It is expected that the far right political party led by Le Pen will join forces with the Left Alliance to overthrow the current government.
However, French President Macron still said at the last minute on Tuesday that he believed the politicians who voted on Wednesday would pull back from the brink. Macron said that supporting a motion of no confidence in the National Assembly would be intolerable cynicism. I don't believe they will vote for the Left Alliance's motion.
In June of this year, after the French ruling party lost in the European Parliament elections, French President Macron decided to dissolve the National Assembly and hold early parliamentary elections. After two rounds of voting, the left-wing alliance "New People's Front" won a relative majority of seats. Due to the failure of the ruling party coalition "Together" to secure a majority of seats, then French Prime Minister Atal announced his resignation.
Right wing Republican Barnier was appointed as Prime Minister by Macron on September 5th this year. But the party's caucus in the National Assembly only has 47 seats. Due to the lack of a majority of seats, Barnier has been threatened with a vote of no confidence. When he was appointed, there was an analysis pointing out that he would face the arduous task of promoting reform measures and submitting the 2025 budget to the National Assembly for review after taking office. On the afternoon of the 2nd local time, French Prime Minister Barnier announced in the National Assembly that he would use Article 49-3 of the Constitution to forcibly pass the draft 2025 budget bill without a parliamentary vote. This ultimately triggered impeachment motions against the Barnier government by the opposition far right "National Alliance" and the far left political party "Unyielding France".
If the French government collapses on Wednesday, Barnier will become the shortest serving prime minister since the establishment of the Fifth French Republic in 1958. And France, whose government collapses before the end of the year, will also enter an unknown territory. Considering that Germany is currently in a "campaign state" due to the early federal parliamentary elections in February next year, if the French government collapses, it is expected to completely create a vacuum in the "heartland" of Europe.
It can be foreseen that as regional political uncertainty increases, the demand for hedging exchange rate risks of holding eurozone assets is bound to increase in the coming weeks. At present, the volatility pricing of EUR/USD in shorter terms has significantly increased, and many traders are concerned that it may fall to parity or even lower.
Powell's final speech before the silence period
Regardless of the political turmoil, Wednesday will also be an extremely important day for routine fundamental risk events.
In addition to the upcoming release of heavyweight economic data such as "small non farm payroll" ADP, Federal Reserve Chairman Powell will be invited to give an interview at the DealBook/Summit conference hosted by The New York Times. This will be investors' last chance to listen to Powell's statement before the Federal Reserve opens its silence period before the December interest rate meeting this weekend.
Brean Capital's Chief Economic Advisor John Ryding wrote in a report this week that Powell's speech on Wednesday "will certainly set the tone for December's interest rate decision.
At present, several Federal Reserve officials who have spoken this week hold an overall open attitude towards whether to cut interest rates this month. San Francisco Federal Reserve Chairman Daly stated on Tuesday that the decision to cut interest rates this month is still uncertain, but it is still under consideration by policy makers.
In order to maintain good economic development, we must continue to adjust policies, whether in December or later. We have the opportunity to debate and discuss this issue at the next meeting, but the key is that we must continue to lower policies to adapt to the economy, "said Daley on Tuesday.
Chicago Fed President Goolsby said on Tuesday that he expects interest rates to "significantly decrease from current levels" in the coming year. Federal Reserve Governor Kugler stated on the same day that the economy is still in a "good state" and inflation is "sustainably moving" towards the central bank's 2% target. Both parties have not explicitly stated whether they are inclined to lower interest rates later this month.
Since September, Federal Reserve officials have cumulatively lowered interest rates by 75 basis points in the past two meetings. They will hold another interest rate meeting from December 17th to 18th local time. According to the Chicago Mercantile Exchange's Federal Reserve Watch tool, traders currently expect a 72% probability of the Fed cutting interest rates at this month's meeting and a 28% probability of remaining inactive.
Before the December resolution, there will be two heavyweight economic data releases from the US government - the November non farm payroll data this Friday and the November CPI data next Wednesday. Therefore, if Powell fails to give a clear signal tonight on whether or not to cut interest rates in December, the performance of these two data may ultimately determine the direction of the Federal Reserve's decision-making at that time.
Waller, a highly influential member of the Federal Reserve, stated on Monday that he is currently inclined to support lowering policy rates at the December meeting. Of course, he also laid out a prerequisite - "This decision will depend on whether the data we receive before this unexpectedly rises and changes my prediction of the inflation path