LONDON – Global stocks mostly rose today as investor concerns over US-China tensions eased following House Speaker Nancy Pelosi’s trip to Taiwan.
Oil prices also marginally rose after the OPEC+ oil cartel, led by Saudi Arabia and Russia, agreed a small increase in production.
The decision to raise production by 100,000 barrels per day for September is likely to disappoint US President Joe Biden, who had lobbied for a big hike to tame soaring energy prices, analysts said.
Analyst Edward Gardner, of Capital Economics, warned however that “as has become increasingly glaring recently, though, an increase in quotas is not the same as an increase in production.”
Output is supposed to have returned to pre-Covid-19 levels, but only on paper, as some members of the 23-nation group have struggled to meet their quotas.
The main contracts were only slightly higher, with Brent – the international benchmark – rising just over US$100 (RM450).
Traders also nervously watched for reactions – so far – to Pelosi’s visit to Taiwan, which China considers a part of its territory.
“What China didn’t do has seemingly been the focal point,” said Patrick O’Hare, at Briefing.com.
“China didn’t take any action that would necessitate a military response from the US. That understanding has sparked a measure of relief for investors as Speaker Pelosi heads to South Korea,” he said.
The highest profile trip to Taiwan in 25 years by a US politician was met with condemnation from Beijing, which vowed “punishment”.
“This week was already shaping up to be another rollercoaster ride and Pelosi’s trip just added another layer of event risk for the markets,” Craig Erlam, an analyst at Oanda, said.
News of the visit had sent shivers yesterday through trading floors that were already on edge over the Ukraine war, surging inflation, rising interest rates and slowing economic growth.
However, most equity markets edged upwards today.
London nudged higher on the eve of a widely-expected half-point interest rate hike by the Bank of England.
“There has been a lot of fear but no material effect,” AvaTrade analyst Naeem Aslam told AFP, when questioned about the markets impact of Pelosi’s visit.
“Hence, we see equities holding on to their gains and moving higher.”
Analysts are also keen to find out what the White House’s response will be, particularly ahead of mid-term elections in November, with anti-China rhetoric playing well with voters but Biden keen not to further harm economic ties.
SPI Asset Management’s Stephen Innes added that the US administration was probably not likely to cut Trump-era tariffs before then.
Today’s broadly positive performance followed a drop on Wall Street, where the Taiwan news was compounded by a series of hawkish comments from Federal Reserve officials indicating more big interest rate hikes could still be in the pipeline. – AFP, August 3, 2022
