Financial Association News on December 4th For global market investors, this Wednesday (December 4th) is destined to be a crucial trading day:

On one hand, after South Korean President Yoon Suk-yeol declared a state of emergency last night, causing turmoil in the South Korean political arena, investors in the Asian session will closely focus on every move in the South Korean market;

On the other hand, the European political arena may also trigger thunder at any time. A vote of no confidence against the French Barnier government is expected to take place on Wednesday, potentially making the Barnier government the first French government to be forced to step down due to a vote of no confidence since 1962;

Finally, at 2:45 a.m. Beijing time on Thursday, in the New York session, Federal Reserve Chairman Powell will be interviewed at the DealBook/Summit conference hosted by The New York Times. This will be his final speech before the Federal Reserve's silent period before the December meeting, and his statement is likely to directly influence people's judgment on whether the Federal Reserve will cut rates in December!

It can be said that within just one day, Asia, Europe, and the Americas, the three major continents influencing the global financial market trend, will all have highly significant highlights. Where will the stock, bond, and foreign exchange markets go on this 'Super Wednesday'? Let us wait and see together...

South Korean stocks opened lower after the state of emergency turmoil

Judging from Wednesday's opening performance, the South Korean stock market predictably opened lower after a night of political turmoil. The South Korean KOSPI index opened down 1.97%. Prior to this, South Korean President Yoon Suk-yeol issued an emergency martial law late at night, which was lifted only 6 hours later.

However, in the forex market, the south korean won has actually gradually stabilized. The USD/KRW soared to the 1444 level after the announcement of a "state of emergency" in South Korea overnight, but during the early Asian session it had fallen back to around 1410. The won has already recovered more than half of its decline.

South Korean President Yoon Suk-yeol suddenly gave a televised speech on Tuesday night, announcing the implementation of a "state of emergency", a decision that few market participants could have predicted. Yoon Suk-yeol listed multiple reasons, stating that the opposition party was holding the parliament hostage, disturbing the country, and claiming to eradicate "anti-national forces" in South Korea. It is reported that this state of emergency is the first in South Korea since 1980.

Around 4 o'clock local time on Wednesday morning, Yoon Suk-yeol gave a new speech to lift the state of emergency, ending the tense night caused by the announcement of the emergency decree. Prior to this, lawmakers had climbed over the fence, bypassed armed guards, and entered the South Korean parliament located in the center of Seoul. In the early hours of Wednesday, with a vote of 190 to 0, they opposed the implementation of the emergency decree.

Due to intense confrontation with the opposition party over budget issues, and internal discord within the conservative Saenuri Party Yoon belongs to due to a political scandal, Yoon Suk-yeol's approval rating has now hit a new low. Against this backdrop, South Korea witnessed a series of shocking political earthquakes on Tuesday. Analysts suggest that recent legislative actions by the South Korean opposition party targeting Yoon Suk-yeol's wife and impeachment of public officials like prosecutors could have been the trigger for Yoon Suk-yeol to announce the "state of emergency".

Following the drama of the "state of emergency", Yoon Suk-yeol's presidency may become increasingly precarious. South Korea's largest opposition party, the Democratic Party, has 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, they will proceed with the impeachment process.

After holding an emergency meeting of members of parliament, the Democratic Party released this decision. The Democratic Party stated, "President Yoon Suk-yeol's announcement of the state of emergency clearly violates the constitution, as he did not comply with any necessary conditions for declaring the state of emergency."

After opening lower on the day, the performance of the South Korean stock market for the rest of the day is evidently worth investors' close attention. It is noteworthy that despite the political turmoil that brewed up overnight, some market participants actually believe that this may bring trading opportunities. Graham Ambrose, Managing Director of the Goldman Sachs London Stock License Sales Team, informed clients that "there may be buying opportunities in Seoul (South Korean market) in the next few days", particularly advising clients to watch for those short-term mispriced stocks.

The French government faces a vote of no confidence head-on.

The military crackdown in South Korea last night came quite suddenly, while on the other side of the Eurasian continent, political turmoil in France has been brewing for more than a week. Today, obviously, will also be a decisive moment affecting the French political arena: Can the Philippe government 'survive' the vote of no confidence?

French parliamentarians will begin debating the motion of no confidence at 4 p.m. local time on Wednesday (11 p.m. Beijing time), followed by the official vote. It is expected that the far-right party led by Le Pen will join forces with the left-wing alliance to overthrow the current government.

However, French President Macron still expressed his belief at the last minute that politicians voting on Wednesday would reconsider. Macron said that the National Assembly supporting the motion of no confidence would be intolerable cynicism. I do not believe they will vote in favor of the left-wing alliance's motion.

In June of this year, following the defeat of the ruling party in the European Parliament elections, French President Macron decided to dissolve the National Assembly and hold parliamentary elections early. After two rounds of voting, the left-wing alliance 'New People's Front' won a relative majority of seats. As the ruling party coalition 'Together' failed to secure a majority, then French Prime Minister Edouard Philippe announced his resignation.

Right-wing Republican Jean Castex was appointed as Prime Minister by Macron on September 5th this year. However, the party only holds 47 seats in the National Assembly. Due to the lack of a majority, Castex has constantly faced the threat of a vote of no confidence. Analysts predicted upon his appointment that he would face the arduous task of pushing through reform measures and presenting the 2025 budget to the National Assembly for review. On the afternoon of the 2nd local time, Prime Minister Castex of France announced in the National Assembly the use of Article 49-3 of the Constitution to forcibly pass the draft 2025 Finance Bill, bypassing a parliamentary vote. This ultimately led to the far-right opposition party 'National Rally' and the far-left political party 'Insubordinate France' launching an impeachment motion against the Castex government.

If the French government collapses on Wednesday, Castex will become the shortest-serving Prime Minister in France since the establishment of the Fifth Republic in 1958. A French government falling before the end of the year will enter uncharted territory. Considering that Germany is currently entering an 'election state' early due to the federal parliamentary elections in February next year, the collapse of the French government is expected to leave the 'heart of Europe' completely exposed to a vacuum.

It can be foreseen that with the increasing political uncertainty in the region, the demand for hedging eurozone asset currency risks will inevitably increase in the coming weeks. Currently, the short-term volatility pricing of the Euro/USD has significantly increased, with many traders concerned that it may fall to parity or even lower.

Powell's Finale Speech Before the Silent Period

Setting aside the political turmoil, Wednesday will also be an extremely important day in terms of regular fundamental risk events.

In addition to heavyweight economic data such as the 'small non-farm' ADP to be released, Federal Reserve Chairman Jerome Powell will be invited to be interviewed at the DealBook/Summit conference hosted by The New York Times. This will be investors' final chance to hear Powell's remarks before the Fed enters a blackout period prior to the December policy meeting.

Brean Capital's chief economist John Ryding wrote in a report this week that Powell's speech on Wednesday 'will definitely set the tone for the rate decision in December'.

Currently, several Federal Reserve officials who have already spoken this week have generally maintained an open stance on whether to cut interest rates this month. San Francisco Fed President Daly stated on Tuesday that it is uncertain whether there will be a rate cut this month, but it remains on policymakers' radar.

'In order to maintain a healthy economic development, we must continue to adjust policies, whether in December or at a later time. This is a question we will have the opportunity to debate and discuss at the next meeting, but the key is we must continue to lower policies to adapt to the economy,' Daly said on Tuesday.

Chicago Fed President Evans stated on Tuesday that he expects rates to 'fall significantly from current levels' over the next year. Federal Reserve Board Governor Brainard mentioned that the economy is still in a 'good state' and the inflation rate is moving steadily towards the central bank's 2% target. Both did not clearly indicate whether they lean towards cutting rates later this month.

Since September, Federal Reserve officials have cumulatively cut rates by 75 basis points in the past two meetings. They will convene for the interest rate policy meeting again on December 17th and 18th local time. According to the CME Group's FedWatch tool, traders currently estimate a 72% probability of a rate cut at this month's meeting, with a 28% probability of standing pat.

Before the December decision, the US will also see the release of two heavyweight economic data points — the November non-farm payrolls on this Friday and the November CPI data next Wednesday. Therefore, if Powell tonight fails to give a clear signal on whether there will be a rate cut in December, the performance of these two datasets may ultimately determine the Fed's decision direction at that time.

Federal Reserve Director Powell, who has a strong influence within the Fed, once said on Monday that he is currently inclined to support a policy rate cut at the December meeting. Of course, he also set a prerequisite - "This decision will depend on whether the data we receive before then unexpectedly improves and changes my forecast for the inflation path."

Editor/Lambor