Sentiment weakens on U.S.-China tensions; Havens boosted

📰 Global equity futures are trading lower amid escalating tensions between the U.S. and China ahead of U.S. House of Representatives Speaker Nancy Pelosi's expected trip to Taiwan. China considers Taiwan its territory and has announced an unspecified military response to a visit by Pelosi. Pelosi will land in Taiwan later today – she would be the highest-ranking American politician to visit Taiwan in 25 years.

Markets ended the previous month with strong gains – the strongest month overall for global equities since 2020 – and are now seeing increased profit-taking. A string of weak economic data heightened concerns about a global slowdown, with U.S. GDP falling for the second consecutive quarter and disappointing manufacturing data in Asia and Europe. 

The deterioration in risk sentiment is also reflected in increased demand for government bonds and other assets considered safe havens. The Japanese yen continues to recoup some of its sharp losses from 2022 and is approaching its strongest level in two months against other currencies. Yields on 10-year U.S. Treasury bonds fell for a fifth day, approaching 2.5% – the lowest since April. 

In the long run, I think a war between China and Taiwan is very likely – the question for me is when, rather than if. Rising tensions between the U.S. and China would severely damage both economies (and the global economy) – concerns about deteriorating relations between the world's two superpowers alone are weighing heavily on risk sentiment.

Commodity prices are facing headwinds, although they remain attractive in the medium term. Cyclical stocks are under pressure, although earnings reports were once again better than expected. After strong gains, investors are still hoping for a continuation of the equity recovery, but increasing uncertainty could not only lead to profit-taking, but also result in a further sell-off.

Gold continues to benefit from rising safe haven demand and weaker U.S. Treasury yields. Other risk-sensitive currencies such as AUDNZD, but also EUR and other Asian currencies (not JPY) are under heavy pressure after the recent short-term recovery rally.


🇺🇸 US Markets ↕️/↘️
Cyclical Stocks ↘️
Tech/Growth Stocks ↕️/↘️
Financial stocks ➡️/↘️
Energy ➡️/↘️

💱 Forex Markets
JPY ↗️
USD, CHF ➡️/↗️
GBP ➡️
EUR, CAD ➡️/↘️

⚒ Commodity Markets ↕️
Oil prices ➡️
Natural Gas prices ➡️/↘️
Metal prices ➡️
Precious Metals ➡️/↗️

⚡️Crypto Market ➡️/↘️

(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)

Yours, Robert 🇺🇸🇹🇼💥🇨🇳