What you need to know…
The S&P 500 Index ($SPX) (SPY) today is down -0.64%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.97%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.52%.
U.S. stock indexes are lower today on Taiwan tensions, a +6 bp rise in the 10-year T-note yield on hawkish Fed comments, and a weaker-than-expected JOLTS job openings report.
Taiwan media outlets are reporting that House Speaker Pelosi is currently en route to Taiwan from Malaysia and is due to land shortly. Media reports say Ms. Pelosi has meetings in Taiwan scheduled on Wednesday, including a visit to Taiwan’s parliament and a meeting with Taiwan’s president. 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 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.
Reuters is reporting that Chinese fighter jets today buzzed the median line that divides the Taiwan strait. There were also reports of cyber attacks on Taiwan government websites.
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.
Today’s July U.S. JOLTS job openings showed a decline of -605,000 to 10.698 million, which was weaker than expectations for a decline to 11.0 million. The JOLTS index is down from the record high of 11.855 million seen in March, but is still far above the pre-pandemic level of about 7 million, illustrating that there are still many jobs available despite concerns about a recession.
Overseas stocks are mostly lower today on Taiwan tensions. The Euro Stoxx 50 today is down -0.62%. 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.
Today’s stock movers…
Bitcoin (^BTCUSD) is down -1.39% this morning, adding to Monday’s loss of -2.85% and falling farther from Saturday’s 1-1/2 month high. Despite the decline in bitcoin, Coinbase (COIN) this morning is up +2.08%, and Marathon Digital (MARA) is up +0.77%.
Sep WTI crude oil futures prices (CLU22) are up +0.24% this morning after Monday’s plunge of -4.80%, which is taking some pressure off oil stocks. Exxon Mobil (XOM) is currently up +0.14%.
U.S.-listed Chinese stocks are vulnerable again today on U.S.-Chinese tensions. Baidu (BIDU) is currently down -3.58%, but Alibaba (BABA) is up +0.89%.
Caterpillar (CAT) is down -3.17% after reporting a Q2 revenue miss and lower sales in China.
Transocean (RIG) is up +20% on positive earnings news.
Cowen Group (COWN) is up more than +8% after the announcement that Toronto-Dominion Bank will buy the investment bank in a deal worth more than $1 billion.
Snowflake (SNOW) is down -1% after a rating cut by BTIG to neutral from buy due to channel checks that suggest a slowdown in revenue growth.
Uber (UBER) is up +14% after a positive earnings report.
Across the markets…
Sep 10-year T-notes (ZNU22) today are down -8 ticks, and the 10-year T-note yield is up +6.1 bp at 2.634%. T-note prices are lower on hawkish comments today from San Francisco Fed President Mary Daly, who said the Fed is “nowhere near almost done” on curbing the inflation rate.
T-note prices are seeing underlying support from a -3 bp decline in the 10-year breakeven inflation expectations rate, a weaker-than-expected JOLTS report, and safe-haven demand tied to Taiwan tensions.
The dollar index (DXY00) today is up +0.40% on hawkish comments by San Francisco Fed President Daly and today’s +6 bp rise in the 10-year T-note yield. The dollar is also seeing some liquidity demand with today’s sell-off in stocks on Taiwan tensions.
EUR/USD (^EURUSD) is down by -0.61%, and USD/JPY (^USDJPY) is down -0.10%. The yen is seeing some capital repatriation demand from Japanese investors due to Taiwan tensions.
August gold (GCQ22) this morning is up +13.1 (+0.74%), and September silver (SIU22) is down -0.037 (-0.21%). Gold is seeing safe-haven demand on Taiwan tensions, but silver is lower on concerns that the U.S.-Chinese conflict over Taiwan may further damage the global economic outlook.
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