From an accelerated decoupling of the world’s two largest economies to a discussion on whether China might weaponize its vast holding of Treasuries, investors are outlining how U.S. House Speaker Nancy Pelosi’s Taiwan trip may ripple across global markets.
Haven assets whipsawed as concerns about the level of military response from China dissipated and Treasuries sold off on hawkish comments from Federal Reserve officials. The yen saw an abrupt turnaround, sinking more than 1% Tuesday after its strongest four-day run since 2020 but climbing again Wednesday. Most stocks and equity futures struggled for traction.
Pelosi’s visit has fanned fresh jitters among investors already spooked by the threat of a global slowdown amid surging inflation. Some strategists warned of dismissing China’s initial response too early — military exercises and some Taiwan trade restrictions — with markets vulnerable to any hint of a worsening of Sino-American relations.
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