Political instability in France is impacting the euro, while the Chinese yuan hits a yearly low due to potential U.S. tariffs. Asian markets show mixed results, with Japan’s Nikkei and South Korea’s KOSPI rising, unlike Chinese stocks. U.S. tech stocks are performing strongly, boosting market confidence. The dollar strengthens against the yen amid favorable U.S. manufacturing data, while the euro and yuan decline. Gold stabilizes, and oil prices remain steady despite fluctuations.
Political Turmoil and Currency Fluctuations
Investors are keeping a close eye on the escalating political crisis in France, where the government is teetering on the edge of collapse, causing the euro to hover near its lowest level in a week. Meanwhile, the Chinese yuan is grappling with challenges as the looming threat of increased U.S. tariffs on China has driven it down to its lowest point in over a year.
Market Movements in Asia and the U.S.
The Japanese Nikkei, which has a significant concentration in technology, surged by 1.6% at 02:00 GMT, while the South Korean KOSPI saw a rise of 1.7%. Taiwanese equities also climbed by 1.1%. Australia’s benchmark stock index experienced a 0.7% increase, achieving a new all-time high. In contrast, Chinese stocks faced pressure with Hong Kong’s Hang Seng index slightly declining and mainland blue chips down by 0.3%. The broader MSCI Asia-Pacific stock index, however, rose by 0.7%.
Futures for the S&P 500 and Nasdaq remained steady after U.S. stock indices hit new highs on Monday, bolstered by strong performances from major tech companies, notably a nearly 19% increase for Meta Platforms and a 12% rise for Tesla. Chris Weston, head of research at Pepperstone, noted, “Hedges on stocks have been unwound, indicating a confident market in a rise until the end of the year,” particularly highlighting the bullish sentiment surrounding the ‘MAG7’ tech stocks. He pointed to Microsoft and Meta as key players in this upward trend, with Microsoft gaining 7.5% overnight.
In the currency market, the dollar climbed 0.2% against the yen, reaching 149.87, although it remained close to its recent low of 149.09, marking the weakest level since late October. The dollar received a boost from unexpectedly positive U.S. manufacturing data, which indicated a slowdown in price increases. However, it faced renewed pressure after Federal Reserve Governor Christopher Waller expressed a preference for a rate cut on December 18. Current trading estimates suggest a 75% chance of a quarter-point cut in the upcoming Fed meeting, an increase from previous projections.
As the market awaits the JOLTS job openings survey and crucial payroll figures due out later this week, the U.S. two-year Treasury yield dipped to 4.1776%, nearing last week’s low of 4.1550%. Meanwhile, the yen has seen support amid speculation regarding a potential quarter-point rate hike by the Bank of Japan on December 19, with traders estimating the likelihood at around 58%. Analyst Tony Sycamore noted that if the USD/JPY pair remains below the 151/152 resistance zone, there could be risks of a more significant drop towards 145.00, especially if the BOJ raises rates while the Fed cuts.
The euro experienced a slight decline, falling 0.1% to $1.0488 after dropping approximately 0.7% overnight and hitting a low of $1.046125. With motions of no confidence filed against Prime Minister Michel Barnier, the French government seems poised for a potential collapse this week. The British pound remained stable at $1.2654, while the yuan slipped to 7.3145 per dollar in offshore trading, marking the lowest level since November of the previous year.
In other economic developments, U.S. President-elect Donald Trump has called on BRICS nations, including China, to refrain from creating or supporting any currency alternatives to the dollar, threatening them with 100% tariffs. Gold prices have stabilized around $2,635 after peaking at a record high of $2,790.15 earlier this month, while oil prices remained relatively stable, with Brent crude futures slightly down to $71.80 per barrel and West Texas Intermediate crude at $68.06 per barrel.