Asian Stocks Fall With US Yields on Pelosi’s Nervousness; australian drops

A man wearing a protective face mask, amid the coronavirus disease (COVID-19) pandemic, walks past a screen displaying the Shanghai Composite Index, the Nikkei Index and the Dow Jones Industrial Average in front of a house of stock exchange in Tokyo, Japan, on February 14, 2022. REUTERS/ Kim Kyung Hoon

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TOKYO, Aug 2 (Reuters) – Asian stocks tumbled on Tuesday on nervousness over an escalation in tension between China and the United States with U.S. House Speaker Nancy Pelosi set to begin a trip to Taiwan, raising fears about the risk of a global recession.

Long-term US Treasury yields fell to a four-month low, pushing up the US dollar, amid a bid for safer assets after China threatened repercussions in the event of Pelosi’s visit to the autonomous island, which China claims as its territory. Crude oil also sank.

Meanwhile, Australian stocks pared declines and the Australian dollar weakened after the central bank raised the key rate by 50 basis points, as expected, with markets interpreting the changes in the accompanying policy statement as dovish. read more

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Japan’s Nikkei (.N225) fell 1.54%, while the Taiwan Stock Index (.TWII) fell 1.87%.

Chinese blue chips (.CSI300) fell 2.47% and Hong Kong’s Hang Seng (.HSI) lost 2.71%.

However, Australia’s benchmark stock index (.AXJO) was just 0.23% lower, following a previous drop of 0.7%.

MSCI’s broader index of Asia-Pacific shares (.MIAP00000PUS) fell 1.33%.

US e-mini stock futures pointed to a 0.44% restart lower for the S&P 500 (.SPX), which tumbled 0.28% overnight.

“We knew from the start that (Pelosi’s trip) would be a driver of risk-off sentiment in the region,” said Carlos Casanova, senior Asia economist at Union Bancaire Privee in Hong Kong.

“There will be a lot of speculation and uncertainty about what the extent of China’s response will be in the short term.”

The week began with China, Europe and the United States reporting weakening factory activity, with US activity slowing to its lowest level since August 2020. read more

That sank crude, with Brent futures dipping as low as $99.27 a barrel on Tuesday after losing nearly $4 overnight. US West Texas Intermediate futures also fell to $93.26, extending Monday’s nearly $5 drop.

The benchmark 10-year US Treasury yield fell as much as 2.53% in Tokyo trading, the lowest since April 5, amid bets the slowdown could boost the Fed. US Federal to ease monetary policy tightening. Bonds also benefited from demand for safety ahead of Pelosi’s visit to Taiwan.

That helped the US dollar fall as low as 130.40 yen for the first time since June 6. The euro rose to $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 of 30 per US dollar.

Meanwhile, the Australian dollar was down 0.51% at $0.69910, extending a 0.14% retracement following the Reserve Bank of Australia’s policy decision.

It had touched the highest level since June 17, at $0.7048, in the previous session, but that was after bouncing off a 26-month low at $0.66825 in the middle of last month.

“The Australian dollar has underperformed other major currencies of late due to global growth concerns, so it really needed an aggressive surprise to reignite its recovery from two-year lows,” said Sean Callow, strategist at Westpac foreign exchange in Sydney.

“Instead, it caused the RBA to leave the door wide open to slow the pace of tightening in future meetings, sending AUD back below $0.70.”

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Reporting by Kevin Buckland; Additional reporting by Tom Westbrook; Edited by Robert Birsell

Our standards: the Thomson Reuters Trust Principles.

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