EconomyPelosi's visit to Taiwan makes markets nervous

Pelosi's visit to Taiwan makes markets nervous

Stocks fell and bond yields fell on Tuesday on fears that a visit by the US House Speaker will further damage US-China relations.

The S&P 500 lost 0.67% to 4,091.19 while the Nasdaq fell 0.16% to 12,348.76. The Dow Jones Industrial Average fell 1.23% to 32,396.17 units.

Investors were seeking safer assets after China threatened repercussions if Pelosi visits the self-ruled island, which Beijing claims as its territory.

In Mexico, the benchmark S&P/BMV IPC stock index fell 1.02% to 46,902.69 points, extending the decline of the previous session, when it fell 1.58%.

The securities of the mining company Industrias Peñoles led the decline, with 5.42% less at 195.22 pesos, after disclosing its quarterly results untimely and that were described as weak by analysts.

China has repeatedly warned that Pelosi must not go to Taiwan. Washington said on Monday that it would not be intimidated by China.

The Taiwan question added to a sense of unease triggered by the fact that China, Europe and the United States reported weakening factory activity on Monday, with that in the United States slowing to its lowest level since August. 2020.

The MSCI index of Asia-Pacific stocks excluding Japan fell 1.3%. Taiwan’s stock index fell 1.6%, while Chinese equities plunged 2%.

Benchmark 10-year Treasury yields fell to 2.52%, their lowest level in four months, also benefiting from bets that a slowdown could prompt the Federal Reserve to ease monetary policy tightening.

Brent futures fell to $99.14 a barrel after losing nearly $4 during the Asian session. US West Texas Intermediate (WTI) futures also fell to $92.94, extending Monday’s nearly $5 decline.

The peso depreciates due to global political uncertainty

The Mexican peso depreciated due to an increase in global risk aversion due to an escalation of tensions between China and the United States.

The domestic currency closed at 20.7484 per dollar, a depreciation of 1.87% compared to Monday’s closing price, spinning its third consecutive session down.

“Markets are falling due to geopolitical nervousness over Taiwan,” Rodolfo Navarrete, an economist at VectorAnálisis, wrote in a report.

China, which has repeatedly warned against a visit by Pelosi, sees visits by US representatives to Taiwan as sending an encouraging signal to the pro-independence camp on the island.

“Economic concerns give way to geopolitics,” local firm CI Banco said in a research note. “This situation increases the appetite for safe assets, which justifies the general strengthening of the dollar and the 10-year US Treasury bond rate to retreat.”

With information from Reuters

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