French, South Korean Stocks Slide Amid Political Crisis

France’s CAC 40 index dropped on Tuesday, impacted by political instability as French lawmakers prepare to vote on no-confidence motions that could topple the coalition government. The index is down nearly 10% since June. In South Korea, the Kospi Index fell nearly 2%, bringing its 2024 losses to 7.5%, following the president’s reversal of a martial law declaration and calls for impeachment.

Equities

The FTSE 100 rose 0.56%, marking its fifth consecutive session of gains, supported by higher oil prices. Shares in Shell and BP climbed 1.6% and 1.8% respectively, as crude prices edged up ahead of an OPEC+ meeting. Midcap stocks also performed strongly, with the FTSE 250 rising 0.6%. SSP Group, the operator of food outlets in airports and train stations, surged 9.6% after announcing plans to double its operating profit margin in continental Europe.

EasyJet gained 3.3%, boosted by several brokerages increasing their target price for the airline. Marston’s shares jumped 8% on news that its Christmas bookings were ahead of last year, coupled with a 64.5% increase in annual profit. In contrast, British American Tobacco and Imperial Brands fell 1.8% and 1% respectively after reports that the Indian government may raise taxes on tobacco products.

In the US, the Nasdaq and S&P 500 posted record closing highs, with the Nasdaq up 0.4% and the S&P 500 gaining 0.05%. The Dow Jones, however, dipped 0.17%. Amazon’s shares rose 1.3% following the announcement of new AI platform initiatives at its AWS conference.

After the market close, Salesforce shares jumped 7% in extended trading after releasing quarterly results showing better-than-expected revenue.

Tesla fell 1.6% after November data revealed a 4.3% year-on-year decline in sales of its China-made electric vehicles, totalling 78,856 units.

Meanwhile, US-listed shares of South Korean companies dropped, with the iShares MSCI South Korea ETF falling 1.6%, as geopolitical developments in South Korea created uncertainty.

Forex & Commodities

The Australian dollar dropped to a four-month low of $0.6408, down 1.22%, after third-quarter GDP data revealed weaker-than-expected growth, increasing the likelihood of earlier interest rate cuts. Markets now fully price in a rate cut by April. The New Zealand dollar also fell, losing 0.5% to $0.5850.

South Korea’s won stabilised at 1,413.80 per dollar, recovering from a two-month low of 1,443.40, following the reversal of a martial law declaration. Traders speculated that the central bank intervened to support the currency. However, political uncertainty and expectations of further monetary easing weighed on the won’s outlook.

The US dollar index rose 0.09% to 106.42, gaining against the yen and euro. The dollar advanced 0.29% to 150.04 yen after touching a three-week low of 148.65 in the previous session. The euro held steady at $1.0504, remaining above recent two-year lows, despite political turbulence in France. Sterling edged down to $1.2663.

Gold prices rose 0.2% to $2,649.09 per ounce, supported by safe-haven demand amid geopolitical tensions. The US ADP employment report and Federal Reserve Chair Jerome Powell's speech later today are likely to shape market expectations for the Fed's December meeting, where a 25-basis-point rate cut has a 73% probability.

Oil prices firmed, with Brent crude up 0.3% at $73.85 a barrel and US West Texas Intermediate crude also rising 0.3% to $70.13. OPEC+ is expected to extend supply cuts into early 2025, although concerns about sluggish demand in the US and China remain.