SINGAPORE, Dec 4 (Reuters) - Asian equities stumbled on

Wednesday while currencies were volatile as traders scrambled to

contend with the political storm in South Korea, where martial

law was imposed and subsequently lifted hours later.

South Korea's won strengthened in early trading

buoyed by suspected intervention but remained close to the

two-year low against the dollar it hit late on Tuesday.

The benchmark KOSPI index was down nearly 2%, taking

its year-to-date losses to over 7%, making it the worst

performing major stock market in Asia this year.

That left the MSCI's broadest index of Asia-Pacific shares

outside Japan, which counts Samsung Electronics ( SSNLF )

as one of its top constituents, down 0.32% on

Wednesday.

South Korean President Yoon Suk Yeol said on Wednesday he

would lift a surprise martial law declaration he had imposed

just hours before, backing down in a standoff with parliament

which roundly rejected his attempt to ban political activity.

"Martial law itself has been lifted but this incident

creates more uncertainty in the political landscape and the

economy," said Min Joo Kang, senior economist at ING.

"We are concerned that these events could impact South

Korea's sovereign credit rating, although this is uncertain at

this stage. However, this is a scenario that could happen."

South Korea's finance ministry said it was prepared to

deploy "unlimited" liquidity into financial markets if needed,

with the Yonhap news agency saying the financial regulator was

ready to deploy 10 trillion won ($7.07 billion) in a stock

market stabilisation fund. The finance minister holds a press

conference at 0120 GMT.

"A bit of uncertainty here given how the events played ...

that can fuel some rush to safety. But Korean authorities appear

to be moving quickly to stabilise markets, and the impact is

likely to be short-lived," said Charu Chanana, chief investment

strategist at Saxo.

Still, the jolt to the market from East Asia stoked further

worries of uncertainties around the globe, with investors

already reeling from the political turmoil in France that has

weighed on the euro, which was down 0.11% at $1.04975.

French bond futures fell 0.13% while European stock

futures was 0.14% lower ahead of French lawmakers' vote

on Wednesday on no-confidence motions which are all but certain

to oust the fragile coalition of Prime Minister Michel Barnier.

"If the government collapses, an emergency legislation will

likely be adopted to avoid a government shutdown ... the spread

between French and German 10-year government bond yields can

further move against the euro," said Carol Kong, currency

strategist at Commonwealth Bank of Australia.

On the macro side, investors are hoping for more cues to

gauge the policy path the Federal Reserve will likely take next

year, with much-anticipated November employment report due on

Friday.

U.S. job openings increased solidly in October while layoffs

dropped by the most in 1-1/2 years, data showed on Tuesday,

suggesting the labour market continued to slow in an orderly

fashion although another survey showed employers were hesitant

to hire more workers.

Markets are now ascribing a 72% chance of a 25 basis point

cut this month, with 80 bps of cuts expected by the end of next

year.

U.S. central bankers said they continue to believe inflation

is heading down to their 2% target and signalled support for

further rate cuts ahead, but none pushed strongly for or against

doing so when they next meet to set rates in two weeks.

The spotlight now turns to Fed Chair Jerome Powell on

Wednesday who will give what are expected to be his last public

remarks before the meeting.

The dollar index, which measures the U.S. currency

against six rivals, was up 0.12% at 106.45. Gold prices

eased 0.17% to $2,639 on a strong dollar.

Oil prices were flat after gaining more than 2% in the

previous session as Israel threatened to attack the Lebanese

state if its truce with Hezbollah collapses, and as investors

positioned for OPEC+ to announce an extension of supply cuts

this week.