Sign up now for FREE unlimited access to Reuters.com Register A look at the day ahead in the markets by Anshuman Daga Just as the markets seemed to be contributing to a less hawkish Federal Reserve and relief for economies and businesses, politics is playing spoilsport. Tensions have flared as US House Speaker Nancy Pelosi prepares to arrive in Taiwan on Tuesday as part of her Asia tour. read more Sign up now for FREE unlimited access to Reuters.com Register The United States says it will not be intimidated by Chinese threats not to “sit idly” if Pelosi makes the trip to the self-governing island claimed by Beijing. The White House – which has not confirmed the trip – said he had the right to go. But China has repeatedly warned of a Pelosi visit. The relationship between the world’s two largest economies has not been smooth, and analysts see the visit by Pelosi, a longtime critic of China, as unsettling for markets. Growing risk aversion pushed Chinese shares (.CSI300) to their biggest drop in three months and the Taiwan dollar is at its lowest level in more than two years. Nervousness is most evident in US Treasuries, with 10-year yields down as much as 9 basis points to 2.5160%, a four-month low and down from an 11-year high of 3.4980% hit in mid-June. The fragile market tone follows weak economic data. Surveys on Monday showed that factories in the United States, Europe and Asia struggled for momentum last month due to subdued global demand and China’s strict COVID-19 restrictions. That pushed oil prices to a two-week low, while bullish bulls pushed the yellow metal to four-week highs. European stock futures showed a weak start on Tuesday. In Europe, German retail sales posted their biggest year-on-year fall since 1994 on Monday, down 8.8% in real terms. Down Under, investors got some relief when Australia’s central bank raised its cash rate by 50 basis points as expected, but tempered guidance for further hikes going forward as it grapples with rising inflation and a slowing economy. Key developments expected to give more direction to markets on Tuesday: Australia’s central bank raises interest rates: read more Federal Reserve Bank of Chicago President Charles Evans talks the economy and monetary policy Major Gains: BP, Generali, DuPont, Caterpillar, Starbucks Sign up now for FREE unlimited access to Reuters.com Register Report by Anshuman Daga. Edited by Vidya Ranganathan Our Standards: The Thomson Reuters Trust Principles.
