Taiwan concerns weigh on Wall Street – Daily Market Brief, August 2, 2022

Stocks in the United States began the month of August with a softer tone thanks to a cautious mindset on Wall Street following a recent surge. Concerns over a possible escalation in tensions between the US & China over Taiwan played into the cautious mood.

S&P 500 fell 0.28 per cent to 4,119 at the end of trade, ending a three-day winning streak and coming to a stop near an important technical resistance. The Nasdaq 100 was down 0.06 per cent to 12,941, but the decline in Treasury yields restricted the sector’s decline.

But even while equities markets look to be losing their pace, it’s possible that this is only transitory given the recent record-breaking rises. For reference, the S&P 500 gained 9.11 per cent in July, making it the third-best month in history for the index. From a seasonal perspective, this may be good news for short-term returns.

Key Factors for Today

– US-CHINA tensions headlines affect market sentiment
– RBA raised cash rates by 50 bps as expected
– DXY continues to trade softly, JPY leads G10 currencies
– Asian stocks traded weakly as tensions simmered amid Pelosi’s visit to Taiwan

Coming Up 

– Canadian Manufacturing PMI
– New Zealand Unemployment
– US NY Fed Household Debt & Credit Report
– Speeches from Fed’s Bullard, Evans & Mester
– OPEC+ JTC meeting

On Wednesday, Nancy Pelosi will meet with Taiwan’s president
This is an event that has raised concerns about a possible military response from the Chinese government. Warnings from China have included comments that China’s People’s Liberation Army could take action if she travels to the country. Antony Blinken, the U.S. secretary of state, asked China to “act responsibly” and “not participate in any escalation” if House Speaker Nancy Pelosi visits Taiwan.

President Joe Biden said that the United States had killed the al-Qaeda leader

U.S. President Joe Biden said Monday night that the United States had carried out a drone operation in Afghanistan that killed al-Qaeda leader Ayman al-Zawahiri. Earlier this year, U.S. intelligence experts detected al- Zawahiri’s whereabouts, according to a senior Biden administration official who spoke on the condition of anonymity to reveal details of the strike.

As expected, the RBA raised its cash rate by 50 basis points to 1.85%.

The Australian dollar is sliding in reaction to the Reserve Bank of Australia (RBA) making the expected decision but modified its future guidance to become slightly more dovish. By saying that it is currently taking further efforts to ‘normalize policy’ rather than ‘eliminating monetary support’ the central bank is seen to be signaling a slowdown on future rate hikes. What has changed dramatically is that policymakers may not have a “pre-set path” to follow, which suggests that rate hikes may be close to coming to an end.

Better-than-expected user numbers boosted Pinterest shares

Even though Pinterest’s revenue and profitability underperformed expectations and the firm issued an uncertain forecast for the third quarter, the company’s stock rose on better-than-expected user numbers. There is “confidence” in Pinterest’s “value-creation opportunity” at Elliott Management, which has announced it is Pinterest’s largest shareholder.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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