We’re seeing more risk aversion on Tuesday as Nancy Pelosi’s trip to Taiwan generates numerous unsettling headlines at a time of strained ties between the US and China.
US House Speaker Pelosi’s proposed visit has been met with numerous threats from Beijing including an unspecified military response. They have continued this morning, hours ahead of the apparent arrival which is clearly making investors very nervous.
Stock markets throughout most of Asia are in the red, with those in China, Hong Kong and Taiwan unsurprisingly seeing the biggest declines. In Europe, it’s more of a mixed bag while US futures are pointing to a slightly lower open which may change in the hours leading up to the opening bell depending on where Pelosi touches down.
Another member of camp “data-dependent”
The Australian dollar slid on Tuesday as the RBA joined the Fed in camp “data-dependent” following a string of aggressive rate hikes. The central bank maintained that further tightening will be warranted but was keen to stress that they are not on a pre-set path and that they will be driven by the data.
The RBA’s forecasts highlight the challenges facing the economy, with unemployment seen falling a little further before rising to 4% but this is naturally subject to immense uncertainty in the outlook. I expect the RBA, like the Fed and others, will continue tightening fairly aggressively over the course of the remainder of the year before proceeding with far more caution into 2023.
Smashed it out of the park
BP unsurprisingly smashed it out of the park in the second quarter, reporting its second highest profit ever as energy firms continue to capitalise on soaring prices. The company has boosted its dividend by 10% and intends to execute a USD 3.5 billion share buyback on the back of the results which were far stronger than expected. It also highlighted its investment in the energy transition although, in the current climate, that will be overshadowed by the billions being returned to shareholders.
There will undoubtedly be an enormous amount of attention on these earnings, which come days after Shell’s record profits, coming at a time when households are facing eye-watering energy bills. But in much the same way that these firms make huge profits when prices are high, it works both ways. Not that this makes it any easier to accept when we’re experiencing such an extreme example as we are currently.
A bottom in bitcoin?
Bitcoin is recording losses for a third consecutive day in what could be a sign of recovery momentum waning. There certainly were signs of this during the most recent rally which peaked a little shy of USD 25,000 and the corrective pattern that’s formed over the last month and a half could easily be viewed as a bearish setup following the sell-off that preceded it. It’s difficult to say at this point but it will probably ultimately depend on inflation, the Fed and whether we see any more worrying crypto news flow. Perhaps the hesitancy is a sign that traders lack confidence that this is a bottom and the start of the good times returning.
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