Asian markets saw a calmer day on Wednesday following the turbulence caused by US House Speaker Nancy Pelosi’s controversial visit to Taiwan.
Investors were in a cautious mood monitoring developments around Sino-US tensions after China reacted furiously to Pelosi’s Taiwan trip, while Washington struggled to play down its significance.
China condemned the highest-level US visit to Taiwan in 25 years as a threat to peace and stability in the Taiwan Strait, responding with a flurry of military exercises, summoning the US ambassador in Beijing, and announcing the suspension of several agricultural imports from Taiwan.
Read more: China Hits Taiwan With Economic Sanctions as Pelosi Visits
Mainland China shares were little changed after posting sharp losses in the previous session.
Defence stocks surged, though, with an index tracking the sector jumping 4.55%, as China’s military announced joint air and sea drills near Taiwan and test launches of conventional missiles in the sea east of the island.
The Shanghai Composite Index dipped 0.7%, or 22.59 points, to 3,163.67, while the Shenzhen Composite Index on China’s second exchange dropped 1%, or 20.98 points, to 2,117.19.
Meanwhile, Hong Kong stocks recovered in morning trade to track gains in Chinese shares listed on Wall Street, led by rises in tech shares. An index tracking major tech firms listed in the financial hub rose 2.25%.
The Hang Seng Index gained 0.4%, or 77.88 points, to 19,767.09.
Japan’s Nikkei index ended higher, rebounding from the previous session’s losses, as investors scooped up shares of Daikin Industries and other firms that reported robust earnings.
The Nikkei share average gained 0.5% to 27,741.90, after shedding 1.4% on Tuesday in its biggest daily loss in three weeks. The broader Topix edged up nearly 0.3% to 1,930.77.
Risk sentiment was helped by US House Speaker Nancy Pelosi’s safe arrival in Taiwan, despite threats of action from China.
Fed Hints at More Rate Hikes
Elsewhere across the region, equities were broadly higher, advancing up to half a percent, while Malaysia’s shares were down as much as 0.8%.
Indian stocks advanced with Mumbai’s signature Nifty 50 index up 0.25%, or 42.70 points, at 17,388.15.
Globally, stocks eased slightly as markets weighed up the risks from Pelosi’s visit to Taiwan and comments from Federal Reserve officials talking up the chance of more aggressive interest rate hikes.
MSCI’s benchmark for global stocks dipped by 0.1% by 0823 GMT, steadying after Tuesday’s drop that took the index off the multi-week highs hit after a rally in July.
In Europe, the STOXX 600 equity benchmark index fell 0.1% after data showed business activity in the euro zone contracted slightly in July for the first time since early last year as consumers reined in spending.
US stock futures were little changed, following the S&P 500’s 0.7% drop overnight.
US Dollar Index Falls
A trio of Fed policymakers signalled on Tuesday that there would be no let-up in the tightening campaign aimed at taming the highest inflation since the 1980s, even though it will take rates to a level that will more significantly curb economic activity.
Traders now see a chance of around 43.5% that the Fed will hike by another 75 basis points (bps) at its next meeting in September.
The benchmark US 10-year Treasury yields added 1.3 bps to 2.755%, after surging on Tuesday by 14 bps as the hawkish Fed comments suggested more rate hikes are coming in the near-term, as inflation has yet to hit its peak.
The US dollar index, which gauges the currency against six major peers, fell 0.25% to 106.17, having rebounded on Tuesday from a nearly one-month low at 105.03.
Oil prices dipped ahead of a meeting of OPEC+ producers at which producers are expected to keep output steady with spare capacity limited and against the backdrop of fears that a slowdown in global growth will hit fuel demand.
Brent crude futures were down $1.34, or 1.3%, at $99.20 a barrel at 0815 GMT. West Texas Intermediate (WTI) crude futures fell $1.28, or 1.4%, to $93.14 a barrel.
Tokyo – Nikkei 225 > UP 0.5% at 27,741.90 (close)
Hong Kong – Hang Seng Index > UP 0.4% at 19,767.09 (close)
Shanghai – Composite < DOWN 0.7% at 3,163.67 (close)
New York – Dow < DOWN 1.2% at 32,396.17 (close)
- Reuters with additional editing by Sean O’Meara