TOKYO (AP) – Asian stocks fell mostly on Tuesday amid concerns about regional stability as a possible visit by US House Speaker Nancy Pelosi to Taiwan prompted threats from Beijing.
Benchmarks across the region moved lower in early trade, including Japan, China, South Korea and Australia.
China views Taiwan as its territory and has repeatedly warned of “serious consequences” if the alleged journey to 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.
Although no official announcement has been made, local media in Taiwan reported that Pelosi would arrive Tuesday night, making her the highest-ranking US official to travel in more than 25 years.
“Risk sentiment took a hit following reports that suggested US House Speaker Pelosi to go ahead with his visit to Taiwan. Investors are likely to seek defensive positions as geopolitical situation prevails over the next few days. could grow in the future,” said Anderson Alves of ActiveTrades.
Japan’s benchmark Nikkei 225 fell 1.4% to 27,594.73. South Korea’s Kospi slipped 0.5% to 2,439.62. Hong Kong’s Hang Seng fell 2.5% to 19,675.87, while the Shanghai Composite fell 2.3% to 3,186.27.
“The first major relief point will be Pelosi’s safe arrival in Taiwan, followed by her safe departure. Neither side wants a real war, but the risk of an accident or an increase in aggressive war play is real, which can always lead to a tactical mistake,” said Stephen Innes, managing partner at SPI Asset Management.
Australia’s S&P/ASX 200 gained 0.1% to close at 6,998.10.
The Reserve Bank of Australia on Tuesday raised its benchmark interest rate for the fourth consecutive month to a six-year high of 1.85%. This was the third consecutive increase of half a percentage point. When the central bank raised the rate by a quarter percentage point at its monthly board meeting in May, it was the first rate hike in more than 11 years.
The cash rate is now at its highest point since May 2016 when the bank reduced the rate from 2% to 1.75%.
On Wall Street, shares gave up early gains and closed slightly lower as investors began another busy week of company earnings and economic reports.
The S&P 500 gave up early gains and closed 0.3% lower at 4,118.63. The Dow Jones Industrial Average fell 0.1% to 32,798.40 and the Nasdaq fell 0.2% to 12,368.98. Shares of the smaller company also gave back some of their recent gains, with the Russell 2000 down 0.1% to 1,883.31.
Bond yields fell mostly. The yield on the 10-year Treasury, which affects mortgage rates, fell to 2.60% from 2.65% late Friday.
A weak start to August was followed by a solid rally for stocks last month: July was the best month for the S&P 500 index since November 2020. The stock has been falling for much of the year as investors worry about high inflation and rising interest rates. A major concern remains whether central banks will raise interest rates too aggressively and push economies into recession.
A report last week showed the US economy shrank in the last quarter and could be in a recession. Stocks’ recent rally came as worrying economic reports led some investors to believe the Fed may 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 mostly been better than expected. Several companies have also warned that inflation is hurting consumer spending and squeeze operations. Businesses are raising prices to try to maintain profits.
Wall Street will also get a number of updates on the job market, which remains 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.
The jump in oil prices throughout the year only worsened the effects of inflation. US crude oil prices have increased by about 25% in 2022 and this has pushed gasoline prices in the US to record levels.
Benchmark US crude fell 5 cents to $93.84 a barrel in energy trading on the New York Mercantile Exchange. International benchmark Brent crude fell 13 cents to $99.90 a barrel.
In currency trading, the US dollar fell from 131.71 yen to 130.79 yen. The Euro is priced at $1.0239, which is less than $1.0259.
Yuri Kageyama is on Twitter