A look at the day ahead in European and global markets from Stella Qiu
Risk sentiment took a hit in Asia on Friday due to renewed political tensions in South Korea, unsettling investors as they awaited a critical U.S. nonfarm payrolls report that could influence expectations of a Federal Reserve rate cut this month.
News of a potential martial law declaration in South Korea triggered heavy selling, with the Korean won falling by as much as 1%, the KOSPI index dropping 1.8% at one point, and the Australian dollar, a gauge of risk appetite, sliding 0.5%.
South Korean authorities responded swiftly, with dealers suggesting that the foreign exchange regulator sold U.S. dollars to curb the won’s decline. This move came as no surprise, as authorities had previously pledged unlimited liquidity to stabilize markets, a strategy that has so far proven effective.
Additionally, the country’s special warfare commander assured that he would resist any new martial law orders, which helped ease some concerns.
While closely monitoring developments in South Korea, the market’s main focus remains on U.S. payrolls data set to be released later Friday. Projections point to a 200,000 increase in jobs for November, recovering from weaker October figures that were impacted by hurricanes and strikes. The unemployment rate is expected to rise slightly to 4.2% from 4.1%.
Markets are hoping for a “Goldilocks” outcome: not too strong to jeopardize the chances of a rate cut, nor too weak to raise concerns about the economy.
Futures indicate a 70% probability of a Fed rate cut on December 18, suggesting that markets are vulnerable to a strong jobs report, especially after recent soft data led futures to price in an additional quarter-point cut for 2025.
Dollar bulls are also cautious about a significant drop in jobs, which could boost expectations for rate cuts and surprise a market that is heavily long on the U.S. dollar.
Even Bitcoin’s rally is showing signs of fatigue after crossing the $100,000 mark for the first time. It dropped to as low as $92,092 before stabilizing at $97,444 on Friday, up 0.4% for the day, with support coming from former President Trump’s appointment of David Sacks, a former PayPal executive, as his White House “artificial intelligence and crypto czar.”
In Europe, markets are expected to open lower with some secondary data due. EUROSTOXX 50 futures are down 0.4%, FTSE futures are 0.1% lower, and U.S. stock futures are slightly weaker.
In other news, Trump announced the appointment of former Senator David Perdue as ambassador to China, selecting a former politician with business experience to help manage relations strained by deep mistrust and trade tensions.
Key developments to watch on Friday:
- Germany’s industrial output
- UK Halifax house prices
- Eurozone’s revised Q3 GDP
