Asian Stocks Slip Amid Political Unrest in South Korea

By Stella Qiu

SYDNEY (Reuters) – Asian stocks slipped on Friday amidst political turmoil in South Korea, while dollar bulls anxiously awaited the U.S. payroll report to see if it would challenge or reinforce expectations of a rate cut this month.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3%, partly due to a 1.7% drop in South Korea's KOSPI. The Korean won fell 0.8% to 1,425.42 per dollar, nearing the low of 1,443.4 hit on Tuesday after President Yoon Suk Yeol declared martial law in the country.

South Korea's main opposition Democratic Party stated that lawmakers were on standby, following numerous reports of another potential martial law declaration, according to the Yonhap news agency.

In other markets, China's blue chips rose by 0.2%, and Hong Kong's Hang Seng gained 0.4%.

Japan's Nikkei dropped 0.6% but remains up 2.5% for the week. Data revealed that Japan’s local wages grew at their fastest pace in 32 years in October, although markets are still favoring no rate hike from the Bank of Japan this month.

All eyes are now on the U.S. nonfarm payrolls report due today. Forecasts anticipate a rise of 200,000 jobs in November, rebounding from a mere 12,000 gain in October, which was affected by hurricanes and strikes. The unemployment rate is expected to edge up to 4.2% from 4.1%.

As markets are priced for a favorable outcome, risks remain; a strong jobs report could jeopardize prospects for rate cuts, whereas unexpectedly weak numbers could heighten economic concerns.

Futures suggest a 70% likelihood of a rate cut from the Federal Reserve on December 18, indicating the market is vulnerable to a robust jobs report. Recently, futures have climbed to factor in an additional quarter-point cut for 2025.

"An outcome below 100k with a U/E rate at 4.2% or above could put pressure on equities, even if it almost guarantees a 25bp rate cut," said Chris Weston, head of research at Pepperstone.

"Conversely, a nonfarm payroll figure above 250k with the unemployment rate at or below 4.1% could see markets derisking as it raises uncertainties regarding Fed easing on December 18."

Overnight, Wall Street dipped from record highs as investors adjusted their positions ahead of the payrolls report, although the tech-heavy Nasdaq has seen a 2.5% increase this week, adding $1 trillion to its market capitalization.

The strong U.S. dollar declined by 0.6% overnight against its peers, remaining near three-week lows at 105.84 on Friday. Dollar bulls are cautious of a sharp pullback, considering the overwhelmingly long positions on the greenback.

The euro rose 0.7% overnight and remained stable at $1.0580 after French Prime Minister Michel Barnier’s resignation, which was widely anticipated.

Bitcoin Reversal

Bitcoin, which reached $100,000 for the first time as investors anticipated a favorable U.S. regulatory approach, saw a profit-taking dip, falling to $92,092 before stabilizing at $98,265 on Friday, up 1% for the day.

"This spike in volatility indicates classic blow-off top behavior," said IG analyst Tony Sycamore. "While we don’t predict the end of the Bitcoin bull run, it signifies we’re entering a consolidation phase in the coming days or weeks."

On Thursday, Trump announced the appointment of former PayPal COO David Sacks as his White House Artificial Intelligence and Crypto Czar.

In the bond market, Treasuries remained steady on Friday. The two-year yield held at 4.15% after a 2 basis point rise overnight, while 10-year benchmark Treasury yields stayed flat at 4.178%, showing little change for the week.

Oil prices continued to decline on Friday despite OPEC+’s decision to delay a planned output increase to April. U.S. West Texas Intermediate (WTI) fell 0.2% to $68.18 a barrel, down 0.4% overnight.

Gold traded within a narrow range, declining by 0.4% to $2,621.89 per ounce, and is down 1.2% for the week.