Global stocks drop and Japan's yen surges as Nancy Pelosi's Taiwan visit drives US-China tensions

Global stocks drop and Japan's yen surges as Nancy Pelosi's Taiwan visit drives US-China tensions
US House Speaker Nancy Pelosi is set to visit Taiwan on Tuesday.Kent Nishimura / Los Angeles Times via Getty Images
  • Global stocks dropped on Tuesday as Nancy Pelosi's visit to Taiwan sent US-China tensions spiking.
  • Investors sought the safety of assets such as the Japanese yen and US government bonds.

Global stocks fell on Tuesday and safe-haven assets such as Japan's yen advanced as US-China tensions spiked over House Speaker Nancy Pelosi's planned visit to Taiwan.

S&P 500 futures were down roughly 0.8%, with Nasdaq 100 and Dow Jones futures also in negative territory. European stocks fell in early trading.

Asian markets were a sea of red overnight, with China's CSI 300 index falling almost 2% and Taiwan's benchmark stock index also sliding.

Tensions between the US and China have risen sharply in recent days as speculation has grown that Pelosi, the Speaker of the US House of Representatives, will visit Taiwan as part of a tour of Asia.

Reuters and other outlets reported that Pelosi is expected to visit Taiwan's president, Tsai Ing-wen, in Taipei later on Tuesday.


China claims Taiwan as part of its territory and has said it would "not sit idly by" if such a senior ranking US politician visits the island.

As reports confirmed Pelosi's visit, Chinese fighter jets flew to the edge of the "median line" in between Taiwan and the Chinese mainland in a show of force.

The deterioration in relations between the world's two most powerful economies worried investors Tuesday, sending them towards so-called safe-haven assets.

Japan's yen, long seen as a haven, rose to its highest level in two months against the dollar. The yield on the key 10-year US Treasury note, which moves inversely to the price, fell as investors sought the safety of government bonds.

Sassan Ghahramani, an economist and president of SGH Macro Advisors, said the threat of economic retaliation from China was particularly worrying.


"We would put an economic response well within the realm of possibilities," he said. Ghahramani said trade sanctions could "have the effect of directly exacerbating shortages and inflationary pressures."