(Bloomberg) — European stocks and US equity futures made modest gains as traders braced for political developments in France and awaited remarks from Federal Reserve Chair Jerome Powell.
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The Stoxx 600 was up 0.2% in Europe, while tech stocks led gains in US futures following positive earnings news in the sector. S&P 500 contracts edged higher after the benchmark eked out its 55th record high of the year on Tuesday. The dollar strengthened and 10-year Treasury yields climbed.
France remained in focus before a no-confidence motion over the budget that looks set to topple the government and throw the country into political turmoil. The euro weakened while the yield premium on French bonds against German equivalents was steady. The CAC 40 index gained 0.4% in Paris.
“This is not a crisis of the style we had during 2012 and 2013 with the European debt crisis,” Nannette Hechler-Fayd’herbe, EMEA chief investment officer at Lombard Odier, said on Bloomberg Television. “France has a current account deficit that is tiny when you think about it, which means it has the ability to recycle and fund the government debt internally. That is its strength on which markets can take solace and build on.”
Powell’s speech and US data on services and manufacturing will draw attention later as investors attempt to assess whether the Fed will ease in December. Fed Bank of San Francisco President Mary Daly said a rate cut this month isn’t certain, but remains on the table.
In Asia, South Korea’s Kospi index slid more than 1% after President Yoon Suk Yeol plunged the nation into a political crisis by briefly imposing martial law. The won regained some ground after tumbling on the developments. A gauge of regional stocks dropped 0.4%
Investors are assessing what’s next for South Korea after the opposition Democratic Party said it will pursue charges of treason and impeachment against Yoon for declaring martial law illegally. The Bank of Korea said it will increase short-term liquidity and take “active” steps in currency markets as needed to ensure stability.
“There’s certainly some lingering uncertainty — but the quick response from Korean authorities means that impact on the region could remain limited,” said Charu Chanana, chief investment strategist at Saxo Markets.
In China, the central bank increased its support for the yuan by setting a significantly stronger-than-expected daily reference rate. The yuan climbed.
