Okiyo, Aug. 2 (BNA): Asian stocks fell on Tuesday on concerns about escalating tensions between China and the United States as US House Speaker Nancy Pelosi is scheduled to start a trip to Taiwan, heightening concerns about the risks of a global recession.
Long-term US Treasury yields plunged to a four-month low, sending the US dollar lower, amid a bid for safer assets after China threatened repercussions in the event of Pelosi’s visit to the self-governing island, which China claims to own. province. Reuters reported that crude oil also fell.
Meanwhile, Australian shares pared their declines and the Australian dollar weakened after the central bank raised its key interest rate by 50 basis points as expected, with markets interpreting the changes in the accompanying policy statement as pessimistic.
Japan’s Nikkei is down 1.54%, while Taiwan’s stock index is down 1.87%.
Chinese blue chips slid 2.47% and Hong Kong’s Hang Seng lost 2.71%.
However, the Australian share index fell only 0.23%, after a previous decline of 0.7%
MSCI’s broadest index of Asia Pacific shares fell 1.33%.
US electronic stock futures pointed to a 0.44% lower restart for the S&P 500, which tumbled 0.28% overnight.
“We knew from the start that (Pelosi’s trip) would be a trigger for risk-off sentiment in the region,” said Carlos Casanova, chief Asian economist at Union Bancaire Privee in Hong Kong.
“There will be a lot of speculation and uncertainty about how China will respond in the short term.”
The week began with China, Europe and the US reporting weak factory activity, with activity in the US slowing to its lowest level since August 2020.
That sent Brent crude prices lower, with Brent crude futures dropping to $99.27 a barrel on Tuesday after losing nearly $4 overnight. US West Texas Intermediate futures also fell to $93.26, extending Monday’s decline by nearly $5.
The benchmark 10-year US Treasury yield fell to 2.53% in Tokyo trade, the lowest since April 5, amid bets that the slowdown could prompt the US Federal Reserve to ease the policy tightening pedal. Bonds also benefited from a search for safety ahead of Pelosi’s visit to Taiwan.
This helped the US dollar slide to a low of 130.40 yen for the first time since June 6th. The euro jumped as high as $1.0294, a level not seen since July 5.
The Taiwan dollar fell to its lowest level in more than two years on the weaker side at 30 against the US dollar.
Meanwhile, the Australian dollar was down 0.51% at $0.69910, extending its 0.14% decline following the Reserve Bank of Australia’s policy decision.
It hit its highest since June 17 at $0.7048 in the previous session but that was after bouncing off a 26-month low of $0.66825 in the middle of last month.
“The Australian dollar has been underperforming other major currencies recently on global growth concerns, so it really needed a tough surprise to reignite the recovery from two-year lows,” said Sean Callow, currency strategist at Westpac in Sydney.
“Instead, the Reserve Bank of Australia has left the door wide open to slow the pace of tightening in future meetings, resulting in the Australian dollar returning below $0.70.”
MI