Asian shares were mostly lower Tuesday amid concerns about regional stability as an expected visit by U.S. House Speaker Nancy Pelosi to Taiwan prompted threats from Beijing.
China sees Taiwan as its own territory and has repeatedly warned of “serious consequences” if the reported trip to the island democracy goes ahead. Pelosi has said she is visiting Singapore, Malaysia, South Korea, and Japan for talks on a variety of topics, including trade, COVID-19, climate change and security.
While there have been no official announcements, local media in Taiwan reported Pelosi will arrive Tuesday night, making her the highest-ranking elected U.S. official to visit in more than 25 years.
“Risk sentiment took a hit following reports suggesting U.S. House Speaker Pelosi is to go ahead with her visit to Taiwan. Investors are likely to be looking for defensive positions as the geopolitical situation could escalate over the next few days,” said Anderson Alves of ActivTrades.Japan’s benchmark Nikkei 225 NIK, -1.37% declined 1.4% in morning trading. Australia’s S&P/ASX 200 XJO, -0.04% dipped 0.3% and South Korea’s Kospi 180721, -0.60% slipped 0.8%.
Hong Kong’s Hang Seng HSI, -2.28% dropped 2.7%, while the Shanghai Composite SHCOMP, -2.20% dove 2.9%. Stocks fell in Singapore STI, -0.17%, Taiwan Y9999, -1.83% and Indonesia JAKIDX, -0.51%.
“The first big relief point will be Pelosi’s safe arrival in Taiwan, followed by her safe departure. No party wants a real war, but the risk of mishap or even aggressive war game escalation is real, which could always lead to a tactical mistake,” Stephen Innes, managing partner at SPI Asset Management said.
Surging COVID-19 infections in some regions, including Japan, remain a major concern. Lockdowns and restrictions on economic activity have caused serious damage to regional economies, disrupting supply chains for major manufacturers, squelching tourism, and shuttering restaurants.
On Wall Street, stocks gave up early gains and closed slightly lower as investors began another busy week of company earnings and economic reports.
The S&P 500 SPX, -0.28% gave up an early gain to end down 0.3% at 4,118.63. The Dow Jones Industrial Average DJIA, -0.14% dipped 0.1% to 32,798.40 and the Nasdaq COMP, -0.18% fell 0.2% to 12,368.98.
Bond yields mostly fell. The yield on the 10-year Treasury, which influences mortgage rates, fell to 2.60% from 2.65% late Friday.
August’s subdued opening follows a solid rally for stocks last month: July was the best month for the S&P 500 index since November 2020. But this week’s array of economic reports and company earnings has left traders “a little cautious,” said Lindsey Bell, chief markets and money strategist at Ally Invest.
“Investors are still assessing where we break from here – further to the upside or reverse course,” Bell said.
Stocks have been falling for much of the year as investors worry about high inflation and rising interest rates. A key concern remains whether central banks will raise interest rates too aggressively and push economies into a recession.
A report last week showed that the U.S. economy contracted last quarter and could be in a recession. Stocks’ recent rally came as worrisome economic reports gave some investors confidence that the Fed can dial back its aggressive pace of rate hikes sooner than expected.
More than half of the companies in the S&P 500 have reported their latest earnings results, which have been mostly better than expected. Many companies have also warned that inflation is hurting consumer spending and squeezing operations. Businesses have been raising prices to try to keep up profits.
Wall Street will also get several updates on the job market, which has remained strong. The Labor Department will release its June survey on job openings and labor turnover on Tuesday and its closely-watched monthly employment report for July on Friday. Source: MW