U.S. Stocks Undercut by Taiwan Tensions

Morning Markets

September S&P 500 futures (ESU22) this morning are down -0.64%, mainly on U.S.-China tensions.  Taiwan media outlets are reporting that House Speaker Pelosi is currently en route to Taiwan from Malaysia and will land in Taiwan at 10:20 pm local time, which is equivalent to this morning at 10:20 am U.S. Eastern time.  Ms. Pelosi’s office has not confirmed any elements of the trip, including how long she will be in Taiwan, if she visits.  Media reports say Ms. Pelosi has meetings scheduled on Wednesday.  After Taiwan, Ms. Pelosi is scheduled to visit South Korea and Japan.

China’s Foreign Ministry spokesman said Monday that China’s military “won’t sit idly by” if House Speaker Nancy Pelosi visits Taiwan.  The spokesman said, “Her stature as the No. 3 U.S. official means a trip would be highly sensitive.  As to what measures, let’s wait and see whether she insists on the visit.” 

Chinese military action, if any occurs, could include new incursions by Chinese fighter jets into Taiwan’s air defense identification zone or across the median line that divides the Taiwan strait, sending planes straight over the Taiwan island, interference with Ms. Pelosi’s plane, firing missiles into the waters near Taiwan, or other actions. The White House Monday called for China not to use Ms. Pelosi’s visit to escalate the situation and said there has been no change in America’s “One China” policy on Chinese-Taiwan relations.

The markets are worried not only about possible military action, but also whether U.S.-Chinese relations could deteriorate further and result in new economic damage or sanctions.

Overseas stocks are mostly lower today on Taiwan tensions.  The Euro Stoxx 50 today is down -0.79%.  The Nikkei index today closed down -1.42%.  China’s Shanghai Composite Index today closed down -2.26%.

The Taiwan Stock Exchange Weighted Index (TSWE or TAIEX) today closed down -1.56%, which was a moderate enough decline to suggest that Taiwan’s investors are not panicking about Ms. Pelosi’s visit and China’s response.

Pre-Market U.S. Stock Movers

Bitcoin (^BTCUSD) is down -0.96% this morning, adding to Monday’s loss of -2.85% and falling farther from Saturday’s 1-1/2 month high. Coinbase (COIN) this morning is down -1.66% in pre-market trading, adding to Monday’s loss of -2.45%.  Marathon Digital (MARA) is down -1.55% in pre-market trading, adding to Monday’s loss of -5.54%. 

Sep WTI crude oil futures prices (CLU22) are up +0.38% this morning, which may allow oil stocks to stabilize today after Monday’s sharp -4.80% sell-off.  Exxon Mobil (XOM) is down -0.16% in pre-market trading.

U.S.-listed Chinese stocks may show weakness again today on U.S.-Chinese tensions.  Alibaba (BABA) is down -2.76% in pre-market trading, and Baidu (BIDU) is down -1.14% in pre-market trading.

Caterpillar (CAT) is down -3% in pre-market trading after reporting a Q2 revenue miss and lower sales in China.

Transocean (RIG) is up +12% in pre-market trading on positive earnings news.

Cowen Group (COWN) is up +7% in pre-market trading on a Wall Street Journal report saying that Toronto-Dominion Bank is close to a deal to buy the investment bank in a deal worth more than $1 billion.

Snowflake (SNOW) is down -4% in pre-market trading after a rating cut by BTIG to neutral from buy due to channel checks that suggest a slowdown in revenue growth.

Avis Budget (CAR) up +5% in pre-market trading after a positive earnings report.

Uber (UBER) is up +14% in pre-market trading after a positive earnings report.

Today’s U.S. Earnings Reports (8/2/2022)

Advanced Micro Devices Inc (AMD), AMETEK Inc (AME), Assurant Inc (AIZ), Caesars Entertainment Inc (CZR), Caterpillar Inc (CAT), CenterPoint Energy Inc (CNP), Coterra Energy Inc (CTRA), Cummins Inc (CMI), DuPont de Nemours Inc (DD), Eaton Corp PLC (ETN), Electronic Arts Inc (EA), Expeditors International of Wa (EXPD), Extra Space Storage Inc (EXR), FMC Corp (FMC), Gartner Inc (IT), Gilead Sciences Inc (GILD), Healthpeak Properties Inc (PEAK), Henry Schein Inc (HSIC), IDEXX Laboratories Inc (IDXX), Illinois Tool Works Inc (ITW), Incyte Corp (INCY), Leidos Holdings Inc (LDOS), Marathon Petroleum Corp (MPC), Marriott International Inc/MD (MAR), Match Group Inc (MTCH), Microchip Technology Inc (MCHP), Molson Coors Beverage Co (TAP), Occidental Petroleum Corp (OXY), Paycom Software Inc (PAYC), PayPal Holdings Inc (PYPL), Pioneer Natural Resources Co (PXD), Prudential Financial Inc (PRU), Public Service Enterprise Group (PEG), S&P Global Inc (SPGI), Sealed Air Corp (SEE), SolarEdge Technologies Inc (SEDG), Starbucks Corp (SBUX), STERIS PLC (STE), Verisk Analytics Inc (VRSK), Waters Corp (WAT), WEC Energy Group Inc (WEC), Xylem Inc/NY (XYL), Zebra Technologies Corp (ZBRA), Zimmer Biomet Holdings Inc (ZBH).

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