Morning Bid: Risk-Wary Markets Count Down to Payrolls

A look at the day ahead in European and global markets from Stella Qiu

Risk sentiment took a hit in Asia on Friday from renewed political rumblings in South Korea, rattling investors’ nerves as they awaited a crucial U.S. nonfarm payrolls report that could alter the odds of a Federal Reserve rate cut this month.

Once markets caught word that there could be another martial law declaration in South Korea, heavy selling hammered the Korean won and the Seoul share market. The won sank by as much as 1%, the KOSPI dived 1.8% at one point and the Australian dollar, a barometer of risk appetite, was down 0.5%.

South Korean authorities were quick to act. Dealers said the foreign exchange regulator is believed to have sold U.S. dollars to limit the decline in the won. That would not be surprising, since the authorities have pledged unlimited liquidity to stabilise markets and that tactic has so far been working.

The country’s special warfare commander also came out to say he would refuse any new order for martial law, calming nerves somewhat.

While keeping a wary eye on South Korea, the market’s main attention is fixed on U.S. payrolls data due for release later on Friday. Forecasts are centred on a rise of 200,000 jobs in November, rebounding from soft numbers in October that reflected the impact of hurricanes and strikes. The unemployment rate likely edged up to 4.2% from 4.1%.

Markets are priced for a Goldilocks outcome: neither so strong that it would threaten the prospects of a rate cut, nor so soft that it would stir up concerns about the economy.

Futures imply a 70% chance of a rate cut by the Fed on Dec. 18, suggesting the market is vulnerable to a hot jobs report, particularly after recent soft data emboldened the futures to price in an extra quarter point cut for 2025.

Dollar bulls were also wary of a sharp pull-back in jobs, which could boost the outlook for rate cuts and wrong-foot a market that is overwhelmingly long the U.S. currency.

Even the rally in Bitcoin is showing signs of fatigue after crossing the $100,000 level for the first time ever.

It retreated as far as $92,092 before steadying at $97,444 on Friday, up 0.4% for the day and supported by Trump’s appointment of former PayPal executive David Sacks to be his White House “artificial intelligence and crypto czar”.

Europe is looking ahead to a lower open with some secondary data due. EUROSTOXX 50 futures are down 0.4% and FTSE futures are 0.1% lower. U.S. stock futures are a fraction easier.

In other news, Trump said he had chosen former Senator David Perdue to be ambassador to China, tapping a former politician with business experience to help steer relations riven by deep mistrust and trade tensions.

Key developments that could influence markets on Friday:

— Germany industrial output

— UK Halifax house prices

— Eurozone revised GDP for Q3

— U.S. non farm payrolls for Nov

(By Stella Qiu; Editing by Edmund Klamann)