Morning Deal: Chasing Pelosi’s Plane

A man reads the Global Times newspaper which features a front-page story about US House of Representatives Speaker Nancy Pelosi’s Asia tour on a street billboard wall in Beijing, China, on 1st Aug, 2022. The front page headline reads: ‘Pelosi visits Asia in the smell of gunpowder.’ REUTERS/Thomas Peter

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A preview of the day ahead at Anshuman Daga Markets

Just as markets seemed to price in a less hawkish Federal Reserve and relief for economies and businesses, politics is playing spoilsport.

Tensions have flared with Speaker of the United States House of Representatives Nancy Pelosi, who is preparing to arrive in Taiwan on Tuesday as part of her Asia tour. Read more

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The United States says it will not be intimidated by Chinese threats to never “stand idly by” if Pelosi makes the trip to the self-governing island claimed by Beijing.

The White House – which has not confirmed the trip – said it had every right to go. But China has repeatedly warned against a visit by Pelosi.

The relationship between the world’s two largest economies has not been smooth and analysts see the visit of longtime China critic Pelosi as unsettling for markets.

Rising risk aversion has forced Chinese stocks (.CSI300) to fall the most in three months and the Taiwanese dollar is at its lowest level in more than two years.

The jitters are most evident in US Treasuries, with 10-year Treasury yields falling as much as 9 basis points to 2.5160%, a four-month low, and pulling back from a high of 11 years of 3.4980% reached in mid-June.

Market fragility follows weak economic data.

Surveys on Monday showed factories in the United States, Europe and Asia struggled to find momentum last month due to sluggish global demand and China’s tough COVID-19 restrictions. .

This sent oil prices to a two-week low while bulls in gold pushed prices of the yellow metal to four-week highs.

European stock futures pointed to a weak start on Tuesday.

In Europe, German retail sales on Monday recorded the biggest year-on-year decline since 1994, falling 8.8% in real terms.

Down Under, investors were somewhat relieved after Australia’s central bank hiked its key rate by 50 basis points as expected, but tempered expectations of further hikes to come as it battles the rise in the inflation and economic slowdown.

Key developments that should further guide markets on Tuesday:

Australia’s central bank raises rates: find out more

Federal Reserve Bank of Chicago President Charles Evans talks about the economy and monetary policy

Main income: BP, Generali, DuPont, Caterpillar, Starbucks

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Reporting by Anshuman Daga; Editing by Vidya Ranganathan

Our standards: The Thomson Reuters Trust Principles.