Pelosi plans to visit Taiwan prompt markets to plunge

By Al Mayadeen English
Source: Agencies
2 Aug 2022 07:30

Global market shares have shown a steep decrease in numbers as US House Speaker Nancy Pelosi plans to visit Taiwan.

Markets plunge amid anticipated Pelosi visit (Archive)

Asian markets fell on Tuesday due to geopolitical concerns, following news that House Speaker Nancy Pelosi may visit Taiwan, escalating China-US tensions.

Traders were already wary after a run of reports showed that economies were beginning to suffer from increasing inflation and central bank interest rate hikes aimed at stabilizing prices.

A meeting between Pelosi and Taiwanese President Tsai Ing-wen is certain to enrage Beijing, which regards the island as its own and has stated that the White House is "playing with fire."

While experts do not believe the action would lead to a conflict, US sources indicated that China was planning military provocations such as firing missiles over the Taiwan Strait or overflights in Taiwan's airspace.

According to John Kirby, a spokesperson for the White House National Security Council, there is "no reason for Beijing to transform a potential visit consistent with longtime US policies into some type of crisis."

Nonetheless, the escalation of hostilities between the world's two heavyweights has sent shivers down trade floors, adding to concerns that the war in Ukraine could grow into a wider war.

Weight of visit on US stocks

Reports of the visit weighed on US stocks, with all three major indices reversing an early rise to end in the red. Asia quickly followed suit.

Losses in Hong Kong and Shanghai were around 3%, while Taipei was down approximately 1.8%. Tokyo was down more than 1%, while Sydney, Seoul, Singapore, Wellington, and Jakarta were also down significantly.

The safe-haven yen rose to a two-month high against the dollar, while the Taiwan dollar fell 0.7%. "Risk is increasing," SPI Asset Management's Stephen Innes said.

Markets are selling as investors examine the global economy's outlook as policymakers try to reduce inflation by raising interest rates while preserving growth.

This week's data revealed that the US economy was in a technical recession, China was being hammered by Covid lockdowns across the country, and Europe was on the verge of collapse as an energy crisis created by the Ukraine war exacerbated its own inflation difficulties.

Traders will be watching the publication of US jobs data on Friday, which will provide new insight into the status of the economy, with a weak report leaving the Fed with some leeway in its rate hikes.

On the oil market, both major contracts extended Monday's sell-off due to lower demand expectations as economies decelerate.

Key figures at around 0230 GMT:

Tokyo - Nikkei 225: DOWN 1.6% at 27,549.41 (break)

Hong Kong - Hang Seng Index: DOWN 3.1 percent at 19,551.19

Shanghai - Composite: DOWN 2.1 percent at 3,192.45

Taipei - TAIEX: DOWN 1.9% at 14,700.48

Dollar/yen: UP at 130.67 yen from 131.61 yen Monday

Euro/dollar: UP at $1.0272 from $1.0262

Pound/dollar: UP at $1.2259 from $1.2255

Euro/pound: DOWN at 83.79 pence from 83.70 pence

West Texas Intermediate: DOWN 0.7% at $93.24 per barrel

Brent North Sea crude: DOWN 0.8% at $00.19 per barrel

New York - Dow: DOWN 0.1 p

China's "welcoming" preparations

Chinese aircraft and naval vessels go out on sorties in the Taiwan Strait as Beijing anticipates a visit from US House Speaker Nancy Pelosi.

As tensions mount between Beijing and Washington over an anticipated visit by US House Speaker Nancy Pelosi to Taiwan on Tuesday, several Chinese warplanes fly on sorties over the Taiwan strait.