Title : Stocks and bond yields fall on Taiwan tensions
Aug 02, 2022 04:15AM ET
Global stocks declined and bond yields fell on Tuesday, compounding fears of a global recession on concern that a visit by U.S. House Speaker Nancy Pelosi to Taiwan would further damage Sino-U.S. relations.
Investors sought safer assets after China threatened repercussions if Pelosi visited the self-ruled island, which Beijing claims as its territory.
Yields on long-term U.S. Treasury bonds fell to their lowest level in four months, while eurozone bond yields declined. The dollar and the Japanese yen rose. As investors sank amid signs of a global manufacturing slowdown, crude oil prices also plunged.
China has repeatedly warned against Pelosi going to Taiwan. Washington said Monday it would not be intimidated by China.
"It's about the Taiwan threat," said Robert Alster, chief investment officer at Close Brothers Asset Management. "You can't say it hasn't risen to the geopolitical agenda."
The Taiwan issue added to a sense of unease triggered by China, Europe, and the U.S. reporting weakening factory activity on Monday, with U.S. factory activity slowing to its lowest level since August 2020.
The U.S. dollar fell to 130.40 against the Japanese yen, levels not seen for nearly two months. The dollar rose 0.25% against a basket of currencies to 105.61.
The Taiwanese dollar fell to its lowest level in more than two years as it settled on the weaker side of 30 to the U.S. dollar.
Australian stocks trimmed declines and the Australian dollar weakened after the central bank raised the key interest rate by 50 basis points, as expected, with markets interpreting the changes to the monetary policy statement as an easing move.
The Australian dollar was down 0.51% at $0.699010, extending a 0.14% retreat following the Reserve Bank of Australia's policy decision.
In the previous session, it had hit the highest since June 17 at $0.7048, but that was after bouncing from a 26-month low at $0.66825 in the middle of last month.