Asian markets tumbled Tuesday on geopolitical fears after reports that House Speaker Nancy Pelosi would visit Taiwan, which has exacerbated China-US tensions.
After a string of data showed economies beginning to take a hit from surging inflation and central bank interest rate hikes aimed at taming prices, traders were already skittish.
A possible meeting between Pelosi and Taiwanese President Tsai Ing-wen is sure to anger Beijing, which sees the island as its territory and has said that the White House is playing with fire. US officials said China was preparing military provocations that could include firing missiles in the Taiwan Strait or large-scale incursions into Taiwan's airspace.
The White House National Security Council spokesman John Kirby told reporters that there was no reason for Beijing to turn a potential visit consistent with longstanding US policies into some sort of crisis. The spike in tension between the two superpowers has caused shivers in trading floors and has caused fears that Russia's invasion of Ukraine could escalate into a wider war.
All three main indexes have reversing an early rally to end in negative territory after reports of the visit hit US stocks.
Hong Kong and Shanghai suffered losses, shedding around three percent, while Taipei was off about 1.8 percent. Tokyo was more than one percent lower, while Sydney, Seoul, Singapore, Wellington and Jakarta were well down.
The safe-haven yen jumped to a two-month high against the dollar and the Taiwan dollar dropped 0.7 percent, as the safe-haven yen jumped to a two-month high against the dollar.
Stephen Innes, SPI Asset Management said that the risk is mounting.
As Pelosi is almost certain to visit Taiwan on Tuesday, now it is in China's hands to see if the situation escalates, he said, while international and Taiwan investors are pretty concerned that the risk of mishap or even aggressive war game escalation is real, which could lead to a tactical mistake. The flare-up in tensions comes less than a week after Biden and Xi Jinping held phone talks, during which the Chinese president warned the United States not to play with fire regarding the island.
Data this week showed that the US economy was in a technical recession, China was battered by Covid lockdowns around the country, and Europe was on the brink as an energy crisis caused by the Ukraine war compounded its own inflation problems.
With a weak reading, traders will be keeping an eye on the Friday release of the US jobs data, which will give a fresh insight into the state of the economy, and will give the Fed some room to relax back on its rate hikes.
Both main contracts extended Monday's sell-off on falling demand expectations as economies slow.
Dollar yen: UP at 130.67 yen from 131.61 yen on Monday.
The euro pound was DOWN from 83.79 pence to 83.70 pence.
West Texas Intermediate: DOWN 0.7 percent at $93.24 per barrel.
Brent North Sea crude: DOWN 0.8 percent at $00.19 per barrel.
New York - Dow: DOWN 0.1 percent at 32,798.