Nancy Pelosi’s possible visit to Taiwan shakes global markets

( Business) –– Global markets fell on Tuesday as investors fear that the possible visit of Nancy Pelosi, speaker of the US House of Representatives, to Taiwan could climb seriously the tensions with China.

Hong Kong’s Hang Seng Index slumped as much as 3.2% in the morning but managed to trim losses to 2.4% by the close. Mainland China’s Shanghai Composite Index ended down 2.3%. Taiwan’s Taiex closed down 1.6%.

For its part, Japan’s Nikkei 225 lost 1.4% and Korea’s Kospi 0.5%.

European markets also suffered a weak start on Tuesday. Germany’s DAX and France’s CAC 40 fell 0.5% and 0.4% respectively. While London’s FTSE 100 fell 0.1%.

Additionally, the Taiwan dollar weakened 0.1% against the US dollar. And the Japanese yen, a traditional insurance currency, rose 0.6% against the dollar.

Concerns about escalating tensions across the Taiwan Strait have rattled markets.

Pelosi is expected to travel to Taiwan as part of her Asia tour, according to a senior island government official and a US official, despite warnings from Biden administration officials who are concerned about China’s response to a high-profile visit.

The visit would be the first in 25 years by a speaker of the US House of Representatives. However, it has not yet appeared on Pelosi’s public itinerary. The trip to Taiwan also comes at a time when US-China relations are already at a low point.

During a regular briefing on Monday, China’s foreign ministry warned against the “appalling political impact” of Pelosi’s planned visit to the self-governing island that China claims as part of its territory. Zhao Lijian, a spokesman for the Foreign Ministry, said the country’s military “will not sit idly by” if Beijing feels that its “sovereignty and territorial integrity” are threatened.

“Pelosi’s visit to Taiwan is polluting sentiment today. And amid escalating tensions across the Taiwan Strait and deepening concerns about a global economic slowdown, investors are diving headfirst into US bonds.” , explained Stephen Innes, managing partner of SPI Asset Management, this Tuesday.

“No party wants a real war. But the risk of a setback or even an aggressive escalation of the war game is real. Which could always lead to tactical error,” he said.

Meanwhile, ING analysts had hoped that China could send fighter jets near or even over Taiwan “before, during and after” Pelosi’s possible visit.

“It appears that the United States has underestimated or misunderstood President Xi’s stance on Taiwan. Xi’s determination to unite Taiwan with mainland China is extremely strong,” analysts said in a research note on Tuesday.

“We should see weakness in the Chinese yuan and the Taiwan dollar in the coming days,” they added.

‘s Eric Cheung, Kylie Atwood, Alex Rogers and Kevin Liptak contributed to this report.