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

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

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TOKYO, Aug 2 (Reuters) – Asian stocks fell on Tuesday as China-U.S. tensions grew. US House of Representatives Speaker Nancy Pelosi is set to embark on a trip to Taiwan, adding to fears of a risk of a global recession.

Long-term US Treasury yields fell to a four-month low, dragging the US dollar lower, in a bid for safer assets after China threatened repercussions if Pelosi visited on the self-governing island, which China claims as its territory. Crude oil also sank.

Meanwhile, Australian stocks pared their decline and the Australian dollar weakened after the central bank raised the benchmark rate by 50 basis points as expected, with markets interpreting the changes to the policy statement as accommodating. Read more

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Japan’s Nikkei (.N225) slipped 1.54%, while Taiwan’s stock index (.TWII) fell 1.87%.

chinese blue chips (.CSI300) fell 2.47% and the Hong Kong Hang Seng (.HSI) lost 2.71%.

However, the Australian equity benchmark (.AXJO) was just 0.23% lower, after an earlier decline of 0.7%

MSCI’s broadest Asia-Pacific equity index (.MIAP00000PUS) down 1.33%.

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

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

“There’s going to be a lot of speculation and uncertainty about the extent of China’s short-term response.”

The week started with China, Europe and the United States reporting weakening factory activity, with that of the United States slowing to its lowest level since August 2020. Read more

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

The benchmark 10-year US Treasury yield fell to 2.53% in Tokyo trade, the lowest since April 5, as slowdown bets could prompt the US Federal Reserve to ease the tightening pedal Politics. Bonds also benefited from security demand ahead of Pelosi’s visit to Taiwan.

This helped the US dollar slide as low as 130.40 yen for the first time since June 6. The euro surged as high as $1.0294, a level not seen since July 5.

The Taiwanese dollar slipped to its lowest level in more than two years, to the weaker side of 30 to the US dollar.

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

It had hit its 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 midway through last month.

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

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

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

Our standards: The Thomson Reuters Trust Principles.

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