Stocks slide as rising US-China tensions trigger risk aversion

Aug 2 (Reuters) – Emerging market stocks lost 1.1% on Tuesday as China’s warnings over a likely US visit to Taiwan raised worries about worsening Sino-US relations.

Sources said US House of Representatives Speaker Nancy Pelosi was expected to arrive in Taipei later on Tuesday, which Beijing said would undermine the relationship between China and the United States as it challenges Beijing’s self-claimed sovereignty over Taiwan.

The White House said Beijing’s responses could include firing missiles near Taiwan, large-scale air or naval activities, among others.

MSCI’s index of emerging market stocks was set for its worst session in three weeks, with Chinese blue-chips down 2%, while Taiwan’s main index slid 1.6% to a two-week low.

Shares of Apple (AAPL) supplier Taiwan Semiconductor Manufacturing Co. dropped 2.4%.

Most benchmark stock indexes in emerging Europe and Africa slid between 0.2% and 1%. Western European shares fell, as did US stock futures.

“The focus is going to shift on what sort of response China may make and it’s really difficult to price that in because we’ve had really strong rhetoric from China but no specific details in terms of what sort of response it may make,” said Piotr Matys, senior FX analyst at InTouch Capital Markets.

“So we are in a sort of wait-and-see mode at the moment.”

Global sentiment was already dour as weak factory activity data for July from China, Europe as well as the United States on Monday had heightened recession worries.

Michael Every, global strategist at Rabobank warned volatility would likely last far longer than this week with flows moving into safe haven currencies such as the dollar and yen.

MSCI’s index of developing world currencies was flat after a three-day rally.

“Asian currencies are more than likely going to be most vulnerable to risk aversion. To a less extent, central and eastern European currencies as they are not directly exposed (to Sino-U.S tensions),” said InTouch’s Matys.

But on the day, the Chinese yuan rebounded after hitting an 11-week low, while the Indian rupee extended gains to hit five-week highs.

“The price action indicates how difficult it is for investors to price in the risk.”

As the euro slipped, Hungary’s forint rallied 1.0%.

The rise in tension comes as the Biden administration debates whether to lift some tariffs on Chinese goods that were imposed under former President Donald Trump.

The tariff war that began in 2018 had slowed global growth and disrupted supply chains. Emerging market stocks fell almost 17% in 2018, while currencies dropped nearly 4%.

(Reporting by Susan Mathew in Bengaluru; Editing by Robert Birsel)

Risk-off mood hits European shares; Sino-US tensions weigh

Aug 2 (Reuters) – European shares fell on Tuesday as weak global factory data fanned economic slowdown fears, while markets were on edge as US House of Representatives Speaker Nancy Pelosi was expected to visit Taiwan.

The pan-European STOXX 600 slid 0.6% in morning trade.

Pelosi was set to visit Taiwan on Tuesday, three sources said, as the United States said it wouldn’t be intimidated by Chinese threats to never “sit idly by” if she made the trip to the self-ruled island claimed by Beijing. nL1N2ZD0VP

“After the best month for Stoxx 600 in July, European equities are giving back some of those gains to kick off August suggesting the rally was slightly overdone,” Victoria Scholar, head of investment at Interactive Investor, said.

“Although Pelosi’s visit could create a deeper strain between Beijing and Washington it is unlikely to result in actual military conflict.”

Global markets were jittery, with MSCI’s broadest index of Asia-Pacific shares ex-Japan down 1.3%, while US futures pointed to a lower open.

In Europe, semiconductor stocks such as ASML Holding, ASM International, BE Semiconductor and STMicroelectronics fell between 0.6% and 3.6%.

“Most of the chip production happens in Asia. If you get a conflagration between China and the US, that’s going to increase geopolitical uncertainty in that region,” said Michael Hewson, chief market analyst at CMC Markets UK.

Meanwhile, Moody’s Investors Service flagged an increased risk of stagflation in European Union countries.

European stocks ended lower in the previous session as energy shares fell following a drop in crude prices after weak factory data across the United States, Europe and Asia rekindled demand concerns.

The energy sector got a boost on Tuesday following strong results from BP, with the London-listed oil major up 4% as it reported a second-quarter profit that beat estimates.

(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Shounak Dasgupta)

Yen set for biggest run of gains in more than 2 years

LONDON, Aug 2 (Reuters) – The yen was on track for its biggest run of gains since the depths of the coronavirus crisis in March 2020, as rising US-China tensions over Taiwan and deepening worries about a global economic slowdown boosted the appeal of safe-haven assets.

Against the dollar, the Japanese currency was on track for a fifth consecutive session of gains on Tuesday, taking its cumulative increase to nearly 4.5% in five trading sessions. In early London trading, the currency was up 0.6% at 130.78 yen, just below a high of 130.40 yen, a level last seen in early June.

Jitters about the impact of an impending visit to Taiwan by US House of Representatives Speaker Nancy Pelosi weighed on stocks and sent investors scurrying into US Treasuries.

The benchmark 10-year Treasury yield fell to 2.516%, its lowest since April, further narrowing the gap between ten-year US debt and equivalent Japanese bonds to 236 basis points (bps), the lowest since early April.

The US economy shrank for a second straight quarter, data released last week showed, intensifying an ongoing debate over whether the country is, or will soon be, in recession, with traders keenly watching for US jobs data on Friday.

“US data releases and the reaction in US yields through the end of this week will be critical as JPY momentum has built a considerable head of steam here,” said John Hardy, head of FX strategy at Saxo Bank.

The Australian dollar fell nearly 1.5% after the Reserve Bank of Australia raised rates by 50 bps to 1.85%, in line with expectations.

The bank said that even though more tightening was expected, it was not on a pre-set path, which some investors interpreted as future policy tightening may not be as aggressive.

China’s offshore yuan touched 6.7957 per dollar, its weakest since mid-May. Some analysts attributed this partly to the tensions around Pelosi’s visit as well as poor economic data from China over the weekend.

The dollar index, which measures the greenback against six peers, rose 0.3% to 105.65.

(Reporting by Saikat Chatterjee; additional reporting by Alun John in HONG KONG; Editing by Mark Potter)

BSP to continue supporting economic recovery despite rate hikes

MANILA, Aug 2 (Reuters) – The Philippine central bank will continue supporting the economy’s recovery despite a planned 25 or 50 basis point rate hike this month, its governor said on Tuesday.

Current policy rates remain accommodative, Bangko Sentral ng Pilipinas Governor Felipe Medalla told a business forum.

Policymakers will meet on August 18 to adjust its reverse repurchase facility rate that is currently at 3.25%.

(Reporting by Neil Jerome Morales; Editing by Kanupriya Kapoor)

Asian stocks slide with US yields on Pelosi jitters; Aussie drops

TOKYO, Aug 2 (Reuters) – Asia stocks tumbled on Tuesday as jitters about an escalation in Sino-US tension with US House of Representatives Speaker Nancy Pelosi set to begin a trip to Taiwan, adding to fears about the risk of global recession.

US long-term Treasury yields dropped to a four-month low, pulling the US dollar down, amid a bid for safer assets after China threatened repercussions in the event of the visit by Pelosi to the self-ruled island, which China claims as its territory. Crude oil also sank.

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

Japan’s Nikkei .N225 slid 1.54%, while Taiwan’s stock index dropped 1.87%.

Chinese blue chips tumbled 2.47% and Hong Kong’s Hang Seng lost 2.71%.

However, Australia’s equity benchmark was just 0.23% lower, after an earlier decline of 0.7%

MSCI’s broadest index of Asia-Pacific shares retreated 1.33%.

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

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

“There’s going to 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 that in the US decelerating to its lowest level since August 2020.

That sank crude, with Brent futures edging down to USD 99.27 a barrel on Tuesday after losing almost USD 4 overnight. US West Texas Intermediate futures also eased to USD 93.26, extending Monday’s almost USD 5 slide.

The benchmark 10-year US Treasury yield fell as low as 2.53% in Tokyo trade, the lowest since April 5, amid wagers the slowdown could spur the US Federal Reserve to ease off the policy-tightening pedal. The bonds also benefited from safety-seeking demand before Pelosi’s Taiwan visit.

That helped the US dollar slide as low as 130.40 yen JPY=EBS for the first time since June 6. The euro jumped as high as USD 1.0294, a level not seen since July 5.

The Taiwan dollar slipped to its lowest level in more than two years on the weaker side of 30 per US dollar.

Meanwhile, the Aussie was 0.51% lower at USD 0.69910, extending a 0.14% retreat following the Reserve Bank of Australia’s policy decision.

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

“The Aussie has been underperforming other major currencies lately given global growth concerns so it really needed a hawkish surprise to reignite its recovery from 2-year lows,” said Sean Callow, a currency strategist at Westpac in Sydney.

“Instead, it got the RBA leaving the door wide open to slowing the pace of tightening at future meetings, sending AUD back below USD 0.70.”

(Reporting by Kevin Buckland; Additional reporting by Tom Westbrook; Editing by Robert Birsel)

Philippines’ 3.5-year T-bond fetches 5.25% coupon rate

MANILA, Aug 2 (Reuters) – Following are results of the Philippine Bureau of the Treasury’s (BTr) auction for a new issue of 3.5-year T-bonds on Tuesday:

* BTr fully awards 35 billion pesos (USD 632.40 million) at 5.25% coupon rate

* Tenders total PHP 106.323 billion

* Details on the BTr’s website www.treasury.gov.ph

(USD 1 = 55.3450 Philippine pesos)

(Reporting by Enrico Dela Cruz; Editing by Martin Petty)

Oil prices fall as weak factory data fuels global demand concerns

Aug 2 (Reuters) – Oil prices dropped again on Tuesday as investors absorbed a bleak outlook for fuel demand with data pointing to a global manufacturing downturn just as major crude producers meet this week to determine whether to increase supply.

Brent crude futures fell 77 cents, or 0.8%, to USD 99.26 a barrel by 0421 GMT, while WTI crude futures eased 67 cents, or 0.7%, to USD 93.22 a barrel.

The slide came after Brent futures slumped on Monday to a session low of USD 99.09 a barrel, their lowest since July 15. The US crude benchmark dropped to as low as USD 92.42 a barrel, its weakest since July 14.

“Crude prices tumbled after a wealth of factory activity data suggested the world is headed towards a giant global economic contraction, and on expectations for more oil output following a very good earnings season for oil companies,” said Edward Moya, senior market analyst from OANDA, in a note.

Recessionary concerns were heightened on Monday as surveys from the United States, Europe and Asia showed that factories struggled for momentum in July. Flagging global demand and China’s strict COVID-19 restrictions slowed production.

The price drops also come as market participants await the outcome of a meeting on Wednesday between the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, together known as OPEC+, to decide on September output.

Two of eight OPEC+ sources in a Reuters survey said that a modest increase for September would be discussed at the Aug. 3 meeting. The rest said output is likely to be held steady.

A Fox Business news reporter said Saudi Arabia will push OPEC+ to increase oil production at the meeting.

“The upward momentums of oil prices has been gradually fading … Once the supply and demand situation shows any sign of further deterioration, oil is likely to lead the decline among commodities,” analysts from Haitong Futures said.

Meanwhile the United States on Monday imposed sanctions on Chinese and other firms it said helped to sell tens of millions of dollars’ in Iranian oil and petrochemical products to East Asia as it seeks to raise pressure on Tehran to curb its nuclear program.

Also casting a cloud over the market is the possibility of a visit to Taiwan by US Speaker of the House Nancy Pelosi, despite Beijing’s warnings against it. The visit would mark the first time a high-profile US official has been on the island in over 25 years, which could escalate tensions between the US and China.

(Reporting by Stephanie Kelly and Muyu Xu; Editing by Kenneth Maxwell)

Long bonds rally as Pelosi’s expected Taiwan trip rattles sentiment

SINGAPORE, Aug 2 (Reuters) – Treasuries rallied in Asia on Tuesday as nervousness that US Speaker Nancy Pelosi’s visit to Taiwan would intensify Sino-US tensions had investors buying safe assets such as bonds.

Longer-dated Treasuries were already well bid since weakening US economic data has markets expecting a slowdown in both US growth and the pace of interest rate hikes.

Benchmark 10-year Treasuries built on those gains, with yields falling as much as 9 basis points to 2.5160%, a four-month low. Twenty-year and 30-year yields also fell a few points before steadying.

Two-year yields held at 2.8260%.

House of Representatives Speaker Pelosi was expected to arrive in Taipei on Tuesday, people briefed on the matter said. China has repeatedly warned against her visit and Asian financial stock markets fell, especially in China.

“The back end is more a pure safe haven,” said ING’s Asia economist Rob Carnell, though adding it was both sentiment and the US economic outlook that were supporting the market.

“Not only have you got peak rate hikes, but you’ve got peak inflation as a theory which has been gathering some pace.”

Last month the Federal Reserve said incoming economic data would be guiding its policy, which investors took to mean that the pace and size of hikes would drop.

US manufacturing activity then dipped to its lowest since June 2020 last month, data released on Monday showed and a slowdown in input price rises offered a hint of a peak in inflation.

(Reporting by Tom Westbrook; Editing by Shri Navaratnam)

Gold rallies to four-week high as US yields, dollar slip

Aug 2 (Reuters) – Gold prices notched a four-week high on Tuesday and extended their winning streak to a fifth session, as a dip in the US dollar and Treasury yields boosted demand for the safe-haven metal amid heightened worries over a global economic slowdown.

Spot gold was up 0.2% at USD 1,774.38 per ounce, as of 0402 GMT, after hitting its highest since July 5 at USD 1,780.39 earlier in the session.

US gold futures gained 0.2% to USD 1,790.80 per ounce.

The dollar weakened 0.2% to a near one-month low against its rivals, making greenback-denominated gold less expensive for other currency holders.

Benchmark US 10-year Treasury yields dropped to a four-month low, reducing the opportunity cost of holding non-interest bearing gold.

“Gold could push a little higher towards mid USD 1,800 because the dollar will continue to weaken over the course of August as a lot of the macro numbers in the US are starting to look worse,” said Edward Meir, an analyst with ED&F Man Capital Markets.

“If things continue to deteriorate the Federal Reserve could maybe stop raising rates at some point to let the economy heal and more importantly, in Europe and China, we could start seeing some kind of stimulus spending.”

Factories across the United States, Europe and Asia had struggled for momentum last month, as flagging global demand and China’s strict COVID-19 restrictions slowed production, surveys showed on Monday.

The recent batch of weak US economic readings pointed to a slowdown that could prompt the Fed to be less aggressive in its monetary policy tightening plans.

Gold, which tends to appreciate on expectations of lower interest rates, has gained nearly USD 100 since falling on July 21 to its lowest level in more than one year.

Investors were also keeping watch on possible escalation in Sino-US tension with US House of Representatives Speaker Nancy Pelosi set to begin a visit to Taiwan amid objections from China.

Spot silver fell 0.6% to USD 20.22 per ounce, platinum was up 0.2% at USD 907.98, and palladium rose 0.3% to USD 2,199.67.

(Reporting by Brijesh Patel in Bengaluru; Editing by Rashmi Aich and Sherry Jacob-Phillips)

Asian stocks slide with oil on recession jitters; dollar drops

TOKYO, Aug 2 (Reuters) – Asia stocks continued a decline from Wall Street on Tuesday, and US long-term Treasury yields sank to a four-month low, pulling the US dollar down against the yen and other currencies as investors worried about the risk of global recession.

There were also jitters about an escalation in Sino-US tension with US House of Representatives Speaker Nancy Pelosi set to begin a visit to Taiwan against the objections of China, which regards the self-governed island as a breakaway province.

Australian equities declined amid an uncertain outlook for commodity demand – which also weighed on crude oil prices – while the local dollar hovered near its highest versus its US counterpart since mid-June with the central bank widely expected to deliver a third consecutive half-point interest rate hike later in the day.

The Australian and South Korean .KS11 equity benchmarks suffered losses of about 0.3% each, while Japan’s Nikkei .N225 tumbled 1.17%.

Chinese blue chips .CSI300 dropped 1.06% and Hong Kong’s Hang Seng lost 1.1%.

Taiwan’s stock index slid 1.68%.

MSCI’s broadest index of Asia-Pacific shares retreated 0.8%.

US e-mini stock futures pointed to a 0.31% lower restart for the S&P 500, which stumbled 0.28% overnight.

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

That sank crude, with Brent futures edging down to USD 99.74 on Tuesday after losing almost USD 4 overnight. US West Texas Intermediate futures also eased to USD 93.67, extending Monday’s almost USD 5 slide.

“Data releases over the past 24 hours have provided further evidence the global economy is slowing,” National Australia Bank strategist Rodrigo Catril wrote in a note to clients.

“Signs of a slowdown are building” in the United States, while “China’s reopening activity burst is over,” he said.

The benchmark 10-year US Treasury yield fell as low as 2.53% in Tokyo trade, the lowest since April 5, amid wagers the slowdown could spur the US Federal Reserve to ease its foot off the policy-tightening pedal. The bonds also benefited from safety-seeking demand before Pelosi’s Taiwan visit, analysts said.

That helped the US dollar slide as low as 130.595 yen for the first time since June 6. The euro jumped as high as USD 1.0294, a level not seen since July 5.

The Taiwan dollar slipped to its lowest level in more than two years on the weaker side of 30 per US dollar.

Meanwhile, the Aussie was more subdued, retreating 0.26% to USD 0.7009, but after hitting the highest since June 17 at USD 0.7048 in the previous session.

Analysts polled by Reuters expect the Reserve Bank of Australia to hike by 50 basis points both on Tuesday and again at its next meeting in September as it races to rein in inflation.

Market participants also see a half-point bump later as a certainty, and have priced an additional 37 basis points of tightening for the September decision.

(Reporting by Kevin Buckland)

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