US House of Representatives Speaker Nancy Pelosi’s visit to Taiwan had a negative impact on equity markets as investors dumped risky stocks.
Stock markets fell as investors dumped risky stocks following rising Sino-U.S. tensions during a visit by House Speaker Nancy Pelosi to Taiwan.
The spokeswoman for the Chinese Ministry of Defense on Tuesday promised “targeted military actions” in response to her visit.
Traders were already jittery after a slew of data showed economies were starting to take a hit from soaring inflation and central bank interest rate hikes.
Any meeting between Pelosi and Taiwanese President Tsai Ing-wen is sure to anger Beijing, which considers the island its territory and has said the White House is playing “with fire”.
Observers do not believe the move will spark a conflict, but moments before he arrived in Taiwan on Tuesday, Chinese state media reported that advanced Su-35 fighter jets were crossing the Taiwan Strait.
Heightened tensions between the world’s two superpowers have sent shivers down the spine, heightening fears that Russia’s attack on Ukraine could escalate into a wider war.
Pelosi lands in Taiwan dismissing warnings from China and Russia
“Very nervous investors”
“We are seeing greater risk aversion as Nancy Pelosi’s trip to Taiwan generates many troubling headlines at a time of strained U.S.-China relations,” said OANDA analyst Craig Erlam.
The trip “made investors very nervous,” he said.
Pelosi’s visit hit U.S. stocks, with all three major indexes falling early Tuesday morning before the tech-heavy Nasdaq Composite Index and the broad-based S&P 500 rose higher in the afternoon.
Asian stocks also fell earlier, although some markets rallied as the day progressed.
Hong Kong and Shanghai led the losses, losing more than 2%, while Taipei lost more than 1% with Tokyo.
In Europe, Frankfurt and Paris were down at the close of trading, while only London ended the day flat after oil giant BP reported soaring profits.
The safe haven yen hit a two-month high against the dollar.
The Taiwanese dollar meanwhile fell to its lowest since April 2020 before rebounding.
The flare-up comes less than a week after US President Joe Biden and Xi Jinping held phone talks in which the Chinese leader warned the US not to “play with fire”.
The market sell-off comes as investors try to gauge the outlook for the global economy as leaders attempt to bring sky-high inflation down by raising rates while maintaining growth.
READ MORE: US Pelosi’s ‘provocative’ visit to Taiwan to undermine ties – China