Global political unrest spreads volatility across stock markets

Global political unrest is sowing uncertainty across several stock markets and economies worldwide, Reuters reports, with South Korea’s president facing calls for impeachment and the French government voting to oust Prime Minister Michel Barnier, already influencing stocks, exchange rates, and investment decisions in the upcoming weeks.

Both stocks and currency in Korea took a hit after South Korean President Yoon Suk Yeol’s decision to declare and then reverse martial law sparked calls for resignation or impeachment. The Kospi Index dropped by 1.3% as a result, taking its year-to-date losses to over 7% and making it the worst-performing major stock market in Asia this year.

The Korean government is trying to contain the situation: The KRW stabilized near a two-year low against the greenback with USD 1 amounting to KRW 1,413. The currency’s stability is suspected to be supported by an intervention from the Korean central bank, with the bank approving emergency rescue measures for the local credit market and the Finance Ministry pledging to deploy “unlimited” liquidity into markets. The ministry said it will activate a KRW 40 tn stock market stabilization fund, Reuters reports.

Over in Europe, the French government collapse could see the risk premium between France’s 10-year bonds and German equivalents tighten by 100 basis points, Bloomberg reports. The premium has already tightened to 84 basis points, after having reached the widest gap since 2012 at 90 basis points, Bloomberg reports separately. Barnier warned of a “storm” for financial markets if he is ousted, the business information service added. French blue chips are already down 3.5% so far this year, though the CAC 40 index has seen a downward trend stall with five days straight of gains. The index closed up 0.7% yesterday.

Other experts are suggesting that a “short squeeze” could occur as investors are seeking to cover bearish positions, according to Bloomberg. They also believe that the light positioning and negative sentiment in French stocks indicate significant risk premiums have been priced in, setting the stage for a potential bounce back.

MARKETS THIS MORNING-

Asian markets are mixed as traders mull the volatility in global markets, with South Korea’s Kospi opening higher but falling 0.4% later, and the Kosdaq down 0.7%. Japan’s Nikkei and the Topix, on the other hand, are up. Wall Street futures are unchanged after another record day for US stocks, with the S&P 500 and Nasdaq both closing at fresh highs.

THE CLOSING BELL: TADAWUL-

The TASI rose 0.6% yesterday on turnover of SAR 7.0 bn. The index is down 0.7% YTD.

In the green: Fakeeh Care (+10.0%), Nadec (+4.4%) and Al Rajhi Takaful (+4.0%).

In the red: Tamkeen (-4.3%), Mesc (-4.2%) and UIHC (-3.9%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.9% yesterday on turnover of SAR 106.4 mn. The index is up 24.8% YTD.

In the green: Al Hasoob (+11.0%), Knowledge Tower (+9.9%) and ASG (+9.6%).

In the red: Amwaj International (-6.9%), Multi Business(-5.9%) and Leaf (-5.8%)