Morning Bid: Markets keep calm as Syria falls in a rush

A look at the day ahead in European and global markets from Wayne Cole

If you are wondering how markets have reacted to the stunning fall of President Bashar al-Assad in Syria, the answer is calmly. Gold and oil prices are up around 0.4%, but that's a modest move for such a rapid turn of events and there are no signs of a rush to safety. Maybe there's just too much going on in the Middle East for traders to know how to react.

It would certainly seem to be a bloody nose for Russian President Putin who has spent years propping up the Assad regime and stands to lose control of his only naval base in the Mediterranean.

Moscow claimed to have a deal to keep the base and its Hmeimim air facilities in Latakia province, according to a Kremlin source quoted by Russian media, while Russia's foreign ministry played down any immediate risk. But it was far from clear whether the rebels had agreed to such a deal. The loss of those bases would severely degrade Russia's power projection in the Middle East and Africa.

Political uncertainty was also a feature in Asia where South Korean stocks slid anew after President Yoon Suk Yeol survived an impeachment vote, only for prosecutors to name him as a subject of a criminal investigation over last week's martial law attempt.

South Korea's finance ministry was out early on Monday to reassure markets of all the support they needed, but the won still slipped towards two-year lows and stocks shed more than 2%.

Sentiment was further strained by a surprisingly sharp 0.6% month-on-month drop in China's consumer price index in November, stoking market mutterings that not enough was being done by Beijing to revive the economy.

Chinese leaders are set to spend two days this week in closed-door talks on next year's policy ambitions during the central economic work conference, but the suspicion is that nothing concrete will come of it.

Core U.S. inflation figures are due on Wednesday and a result above the +0.3% forecast would challenge the market's confidence in a December rate cut by the Fed. The implied probability is currently at 83% with a further 75 basis points of easing priced in for next year.

In that regard, it was a relief that President-elect Donald Trump said on Sunday he would not try to replace Fed Chair Jerome Powell upon taking office in January.

Of the central banks meeting this week, the ECB is seen cutting by 25 basis points and the BoC by 50 bps. The SNB could also go by 50 bps given how much it has been spending to restrain the Swiss franc. The scale of its intervention to sell francs for euros is likely the reason why the single currency is not testing parity on the U.S. dollar right now.

Key developments that could influence markets on Monday:

- Participation by ECB board member Piero Cipollone in Eurogroup meeting

- Bank of England Deputy Governor Dave Ramsden gives a speech on financial stability

- Euro zone finance ministers meet to assess their Draft Budgetary Plans

- Euro Zone Sentix Index for Dec

(By Wayne Cole; Editing by Edmund Klamann)