Markets on edge over Nancy Pelosi's trip to Taiwan

Wall Street is poised to open lower on Tuesday as a possible visit by US House Speaker Nancy Pelosi to Taiwan prompted threats from Beijing.

Futures for the Dow Jones industrials fell 0.5 per cent and futures for the S and P 500 declined 0.6 per cent.

China sees Taiwan as its own territory and has repeatedly warned of “serious consequences” if the reported trip to the island democracy goes ahead.

Pelosi has said she is visiting Singapore, Malaysia, South Korea and Japan for talks on a variety of topics, including trade, Covid-19, climate change and security.

While there have been no official announcements, local media in Taiwan reported Pelosi will arrive on Tuesday night, making her the highest-ranking elected US official to visit in more than 25 years.

Also Read | Chinese warplanes buzz Taiwan Strait dividing line ahead of Nancy Pelosi visit

“The first big relief point will be Pelosi's safe arrival in Taiwan, followed by her safe departure," said Stephen Innes, managing partner at SPI Asset Management.

"No party wants a real war, but the risk of mishap or even aggressive war game escalation is real, which could always lead to a tactical mistake."

In Asian trading, Japan's benchmark Nikkei 225 declined 1.4 per cent to 27,594.73.

South Korea's Kospi slipped 0.5 per cent to 2,439.62. Hong Kong's Hang Seng dropped 2.4 per cent to 19,689.21, while the Shanghai Composite dove 2.3 per cent to 3,186.27.

Australia's S and P/ASX 200 edged 0.1 per cent higher to 6,998.10.

The Reserve Bank of Australia on Tuesday boosted its benchmark interest rate for a fourth consecutive month to a six-year high of 1.85 per cent.

It was the third consecutive hike of half a percentage point. When the central bank lifted the rate by a quarter percentage point at its monthly board meeting in May, it was the first rate hike in more than 11 years.

The cash rate is now at its highest point since May 2016 when the bank cut the rate from to 1.75 per cent from 2 per cent.

France's CAC 40 slipped 0.5 per cent in early trading while Germany's DAX fell 0.6 per cent. Britain's FTSE 100 inched up 0.1 per cent.

Also Read | How China could hit back over Nancy Pelosi’s Taiwan visit

On Monday, the S and P 500 gave up an early gain to end down 0.3 per cent at 4,118.63.

The Dow Jones Industrial Average dipped 0.1per cent to 32,798.40 and the Nasdaq fell 0.2 per cent to 12,368.98.

Smaller company stocks also gave back some of their recent gains, nudging the Russell 2000 0.1 per cent lower to 1,883.31.

High inflation continues to drag on markets along with the potential for further interest rate hikes from central banks that could unintentionally push economies into a recession.

More than half of the companies in the S and P 500 have reported their latest earnings results, which have been mostly better than expected.

However, companies have also warned that inflation is weighing on customer spending and squeezing operations. Businesses have been raising prices to try to keep up profits.

Uber jumped 14 per cent in premarket after the ride-sharing company said rides increased by 24 per cent and revenue more than doubled in the second quarter as Americans headed back to offices and are going out more as anxiety over Covid-19 eases.

BP shares rose 2.5 per cent in premarket trading after the British energy giant reported that its earnings tripled in the second quarter as it profited from oil and natural gas prices that soared after Russia invaded Ukraine.

Wall Street will also get several updates on the job market, which has remained strong.

The Labour Department will release its June survey on job openings and labour turnover on Tuesday and its closely-watched monthly employment report for July on Friday.

Also Read | Taiwan holds drills amid Pelosi visit concern, China tension

A surge in oil prices throughout the year only worsened the impact from inflation.

US crude oil prices are up roughly 25 per cent in 2022 and that has raised gasoline prices in the US to record levels.

In energy trading, benchmark US crude gained 67 cents to $94.56 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, rose 52 cents to $100.55 a barrel.

In currency trading, the US dollar edged down to 130.97 Japanese yen from 131.71 yen. The euro cost $1.0232, down from $1.0259.