Chinese Business

Global stocks mostly rose Wednesday as traders tracked House Speaker Nancy Pelosi’s visit to Taiwan, which has further strained China-US ties.

The highest profile trip to Taiwan in 25 years by a US politician met with condemnation from Beijing, which warned of serious economic and military consequences.

The news had sent shivers on Tuesday 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 on Wednesday.

London nudged higher on the eve of a widely-expected half-point interest rate hike in Britain.

Oil prices slid as the OPEC+ group of major oil exporters convened to discuss output strategy.

Meanwhile, Pelosi departed Taiwan on Wednesday evening, ending her controversial landmark visit that Beijing responded to with threats and military drills.

– Equities hold gains –

“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 President Joe 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.

Wednesday’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.

Stocks rallied last week and Treasury yields dropped after boss Jerome Powell hinted the bank could begin slowing down, but the latest remarks suggest a hoped-for dovish pivot might not be coming just yet as inflation remains stubbornly high.

– Key figures at around 1030 GMT –

London – FTSE 100: UP 0.1 percent at 7,413.24 points

Frankfurt – DAX: UP 0.2 percent at 13,478.84

Paris – CAC 40: UP 0.2 at 6,421.76

EURO STOXX 50: UP 0.4 percent at 3,699.33

Tokyo – Nikkei 225: UP 0.5 percent at 27,741.90 (close)

Hong Kong – Hang Seng Index: UP 0.4 percent at 19,767.09 (close)

Shanghai – Composite: DOWN 0.7 percent at 3,163.67 (close)

Taipei – TAIEX: DOWN 0.2 percent at 14,777.02 (close)

New York – Dow: DOWN 1.2 percent at 32,396.17 (close)

Dollar/yen: DOWN at 133.04 yen from 133.10 yen Tuesday

Euro/dollar: UP at $1.0196 from $1.0166

Pound/dollar: UP at $1.2185 from $1.2170

Euro/pound: UP at 83.68 pence from 83.57 pence

Brent North Sea crude: DOWN 0.9 percent at $99.62 per barrel

West Texas Intermediate: DOWN 0.6 percent at $93.88 per barrel

burs/rfj/bp

Asian markets mostly rose Wednesday after the previous day’s reverse, though traders remained on edge after House Speaker Nancy Pelosi’s visit to Taiwan, which has further strained China-US ties and raised concerns about the long-term impact on the global outlook.

The highest profile trip to the island in 25 years by a US politician was met with condemnation from Beijing, which warned of serious economic and military consequences.

Taiwan said more than 20 Chinese military aircraft had flown into the island’s air defence identification zone — an area wider than its territorial airspace that overlaps with part of China’s air defence zone. The People’s Liberation Army was also due to conduct a series of drills, while Foreign Minister Wang Yi vowed to “punish” those who offended the country.

Beijing said it would suspend imports of some citrus fruits and fish from Taiwan over alleged “repeated” detection of excessive pesticide residue and positive coronavirus tests on packages, while exports of natural sand were also halted, with no details provided.

Taiwan President Tsai Ing-wen struck a defiant tone at her meeting with Pelosi, saying the island “will not back down. We will… continue to hold the line of defence for democracy”.

At the event, Pelosi said her delegation “came to Taiwan to make unequivocally clear we will not abandon our commitment to Taiwan”.

No one expected it would spark a conflict, but the crisis sent shivers through trading floors that were already on edge over a range of issues including the Ukraine war, surging inflation, rising interest rates and slowing economic growth.

However, Asia enjoyed a small recovery, though some markets pared morning gains.

Hong Kong, Taipei, Tokyo, Singapore, Seoul, Wellington, Jakarta and Manila all rose, though Shanghai, Mumbai, Sydney and Bangkok edged down.

London, Paris and Frankfurt all fell at the open.

The “short-term implication may be ‘sell the rumour, buy the news’ as the official response so far remains much more restrained versus what the market has feared,” Xiadong Bao, at Edmond de Rothschild Asset Management, said.

“But the mid/long-term implication can be more significant, which may be currently overlooked by the market. The official return of the US influence in Asia-Pacific will inevitably accelerate US-China decoupling.”

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 with President Joe 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.

The broadly positive performance in Asia followed a drop on Wall Street, where the Taiwan crisis was compounded by a series of hawkish comments from Federal Reserve officials indicating more big interest rate hikes could still be in the pipeline.

Stocks rallied last week and Treasury yields dropped after boss Jerome Powell hinted the bank could begin slowing down, but the latest remarks suggest a hoped-for dovish pivot might not be coming just yet as inflation remains stubbornly high.

“This round of Fed speak suggests markets might be a little too optimistic into pricing in a Fed pivot and that rate cut calls for next year are too optimistic,” said OANDA’s Edward Moya.

The latest developments have raised concerns that the volatility on markets would likely continue for some time.

“It’s hard to see any meaningful upside in equities right now,” said Xi Qiao, of UBS Group. “The market is going to trade pretty mixed, stay choppy until we have a little bit more certainty,” she told Bloomberg News.

– Key figures at around 0810 GMT –

Tokyo – Nikkei 225: UP 0.5 percent at 27,741.90 (close)

Hong Kong – Hang Seng Index: UP 0.4 percent at 19,767.09 (close)

Shanghai – Composite: DOWN 0.7 percent at 3,163.67 (close)

Taipei – TAIEX: DOWN 0.2 percent at 14,777.02 (close)

London – FTSE 100: DOWN 0.3 percent at 7,386.52

Dollar/yen: UP at 133.19 yen from 133.10 yen Tuesday

Euro/dollar: UP at $1.0183 from $1.0168

Pound/dollar: UP at $1.2206 from $1.2163

Euro/pound: UP at 83.43 pence from 83.57 pence

West Texas Intermediate: DOWN 0.9 percent at $93.60 per barrel

Brent North Sea crude: DOWN 0.9 percent at $99.63 per barrel

New York – Dow: DOWN 1.2 percent at 32,396.17 (close)

China has launched a volley of trade curbs against Taiwan in addition to live-fire military drills, as US House Speaker Nancy Pelosi visited the island despite Beijing’s warnings.

China considers Taiwan its territory and tries to keep it isolated internationally, opposing countries from maintaining official contacts with the self-ruled democratic island.

After Pelosi became the highest-profile elected US official to visit Taiwan in 25 years, Chinese foreign ministry spokeswoman Hua Chunying said Wednesday the response will be “resolute, forceful and effective”.

Here are the measures China has announced so far:

– Military exercises –

The first response was announced swiftly: live-fire military drills in zones encircling Taiwan — at some points, within just 20 kilometres (12 miles) of the island’s shore.

The drills will include “long-range live ammunition shooting” in the Taiwan Strait, which separates the island from mainland China and straddles vital shipping lanes.

Taiwan’s defence ministry described the drills as “an irrational move to challenge the international order”.

And the island’s Mainland Affairs Council, which sets the government’s China policies, accused Beijing of “vicious intimidation”.

Beijing cannot afford to be seen as toothless after ramping up the rhetoric ahead of Pelosi’s arrival, analysts said.

“It will be imperative for the Chinese regime to underline its nationalist credentials to its domestic audience,” said James Char, an associate research fellow at Singapore’s S. Rajaratnam School of International Studies.

“Beijing cannot be seen as weak by its own people.”

– Trade curbs –

China on Wednesday also imposed curbs on the import of fruit and fish from Taiwan.

Its customs authorities said it would suspend some citrus fruit imports over alleged “repeated” detection of excessive pesticide residue.

It also banned the import of certain fish from the island, pointing to the discovery of the coronavirus on packages.

These bans came a day after Taipei’s Council of Agriculture said China had cited regulatory breaches in suspending the import of Taiwanese goods including fishery products, tea and honey.

It is not the first time Beijing has aimed at Taiwan’s agricultural products — it banned pineapple imports in March 2021, citing the discovery of pests. However, the move was widely seen as politically driven.

The moves are part of a “common pattern for Beijing”, said Even Pay, an agriculture analyst at consultancy Trivium China.

More disruptions of agricultural and food trade can be expected in the coming days, she added.

“When diplomatic or trade tensions are running high, Chinese regulators typically take an extremely strict approach to compliance… looking for any issues that can be used to justify a trade ban,” she told AFP.

The Chinese commerce ministry said in a separate notice that it would “suspend the export of natural sand to Taiwan” from Wednesday, without providing details.

Natural sand is generally used for producing concrete and asphalt, and most of Taiwan’s imported sand and gravel comes from China.

– Bans on ‘secessionists’ –

Beijing has ramped up pressure on Taiwan since President Tsai Ing-wen took office in 2016, as she views the island as a de facto sovereign nation and not part of “one China”.

The Chinese State Council’s Taiwan Affairs Office said Wednesday that it will punish two Taiwan organisations with close links to “die-hard” secessionists — the Taiwan Foundation for Democracy and International Cooperation and Development Fund.

Enterprises that have donated to the groups, such as Speedtech Energy and Hyweb Technology, will also be prohibited from working with Chinese firms.

Nintendo said Wednesday its first-quarter net profit jumped 28 percent on-year, mainly thanks to a weaker yen, but hardware and software sales declined because of a chip shortage and Covid-19 supply issues.

The yen has plummeted more than 10 percent against the dollar this year as sky-high US inflation fuels a widening monetary policy gap — a boon for Japanese companies like Nintendo who sell products overseas.

For the three months to June, the gaming giant posted a net profit of 118.9 billion yen ($893 million), citing the positive impact of “the depreciation of the yen”.

But the company left its annual forecast unchanged, warning that the global shortage of semiconductors and other logistical snarl-ups could hamper console production and distribution.

New game releases got off to a good start, including “Nintendo Switch Sports” and “Mario Strikers: Battle League”, it said, but sales were still no match for the previous year during the pandemic gaming boom.

“Due to the effects of supply shortages in semiconductors and other components among other factors, hardware sales were down 22.9 percent year-on-year, and software sales were down 8.6 percent year-on-year,” Nintendo added.

Soaring demand for indoor entertainment during virus lockdowns sent the company’s profits soaring to an annual record of 480 billion yen in 2020-21.

The firm nearly matched that figure in the last financial year, with its blockbuster Switch console continuing to perform well and strong software sales, especially for “Mario Party Superstars” and the latest Pokemon titles.

But Nintendo now has a more cautious outlook as life returns to normal, causing the gaming craze to slow, and expects to report a 340-billion yen net profit in 2022-23.

Hideki Yasuda, senior analyst at Toyo Securities, warned that the chip shortage and supply problems linked to Covid-19 lockdowns in China would continue to pose headaches for Nintendo.

“The company is feeling significant pressure on its supply chain,” he told AFP before the earnings release. “The Switch is sold out at stores. There is not enough supply.”

It will be “very difficult” for Nintendo to hit its annual production target for the console if the problems continue, Yasuda said, after Switch sales declined 20 percent on-year in 2021-22.

However, a recession in the United States or elsewhere is unlikely to pose a major problem, he said.

“Video gaming doesn’t feel the impact of recessions. When the economy is strong, people buy products. When the economy weakens, people spend more time playing games.”

Asian markets mostly rose Wednesday after the previous day’s reverse, with focus on House Speaker Nancy Pelosi’s visit to Taiwan, which has further strained already tense China-US ties and raised concerns about the long-term impact on the global outlook.

The highest profile trip to the island in 25 years by a US politician was met with condemnation from Beijing, which warned of serious economic and military consequences.

Taiwan said more than 20 Chinese military aircraft had flown into the island’s air defence identification zone — an area wider than its territorial airspace that overlaps with part of China’s air defence zone. The People’s Liberation Army was also due to conduct a series of drills.

Beijing views the self-ruled island as part of its territory to be seized by force if necessary.

No one expected it would spark a conflict, but the crisis sent shivers through trading floors that were already on edge over a range of issues including the Ukraine war, surging inflation, rising interest rates and slowing economic growth.

However, ahead of a meeting between Pelosi and Taiwan President Tsai Ing-wen most markets saw a recovery, with Hong Kong and Shanghai among the best gainers.

Tokyo, Singapore, Seoul, Wellington and Manila were also up, though Taipei, Sydney and Jakarta edged down.

The “short-term implication may be ‘sell the rumour, buy the news’ as the official response so far remains much more restrained versus what the market has feared,” Xiadong Bao, at Edmond de Rothschild Asset Management, said.

“But the mid/long-term implication can be more significant, which may be currently overlooked by the market. The official return of the US influence in Asia-Pacific will inevitably accelerate US-China decoupling.”

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 with President Joe 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.

The positive start to the day in Asia followed a drop on Wall Street, where the Taiwan crisis was compounded by a series of hawkish comments from Federal Reserve officials indicating more big interest rate hikes could still be in the pipeline.

Stocks rallied last week and Treasury yields dropped after boss Jerome Powell hinted the bank could begin slowing down, but the latest remarks suggest a hoped-for dovish pivot might not be coming just yet as inflation remains stubbornly high.

The latest developments have raised concerns that the volatility on markets would likely continue for some time.

“It’s hard to see any meaningful upside in equities right now,” said Xi Qiao, of UBS Group. “The market is going to trade pretty mixed, stay choppy until we have a little bit more certainty,” she told Bloomberg News.

– Key figures at around 0230 GMT –

Tokyo – Nikkei 225: UP 0.5 percent at 27,740.97 (break)

Hong Kong – Hang Seng Index: UP 0.9 percent at 19,864.26

Shanghai – Composite: UP 0.6 percent at 3,204.47

Taipei – TAIEX: DOWN 0.1 percent at 14,732.65

Dollar/yen: UP at 133.54 yen from 133.10 yen Tuesday

Euro/dollar: UP at $1.0174 from $1.0168

Pound/dollar: UP at $1.2165 from $1.2163

Euro/pound: UP at 83.64 pence from 83.57 pence

West Texas Intermediate: UP 0.1 percent at $94.50 per barrel

Brent North Sea crude: FLAT at $100.54 per barrel

New York – Dow: DOWN 1.2 percent at 32,396.17 (close)

London – FTSE 100: DOWN 0.1 percent at 7,409.11 (close)

Airbnb said Tuesday revenue in the recently ended quarter topped $2 billion as people shook off pandemic worries and took part in a banner travel season.

The home rental platform logged a net income of $379 million in what it touted as the most profitable second quarter in its history.

As a sign of confidence in its future, the San Francisco-based company announced it will devote $2 billion to buying back shares.

“During the height of the pandemic, we made many difficult choices to reduce our spending, making us a leaner and more focused company,” the company said in a letter to investors.

“Airbnb is well positioned for whatever lies ahead.”

More than 103 million nights and travel “experiences” arranged by Airbnb were booked during the quarter, setting a new high, despite inflation and other broad economic woes, the company reported.

The $2.1 billion in revenue taken in during the quarter was 58 percent higher than the same period a year earlier.

“We are in the midst of our strongest peak travel season yet,” Airbnb said in the letter.

“On July 4th, we recorded our highest single day revenue ever, signaling the strong summer season ahead.”

Airbnb expects to set a new revenue record in the current quarter, bringing in between $2.78 billion and $2.88 billion.

“We have nearly every type of space in nearly every location, so however travel changes, we are able to adapt,” Airbnb said.

“Regardless of the economic environment, our guests come to Airbnb because they can find great value, and our hosts can earn extra income.”

The optimism came despite Airbnb shutting down its business in China early this year as pandemic lockdowns show no sign of ending there.

Airbnb in July stopped booking stays or visitor “experiences” in China, focusing instead on helping people there with travel plans outside the country, the company said in an earnings report.

“We made this difficult decision based on the costly and complex challenges of operating in the country, exacerbated by the severe Covid lockdowns,” Airbnb said.

“We continue to expect Asia Pacific, including outbound travel from China, to represent a significant growth opportunity for Airbnb over the long term.”

Airbnb launched its business in China six years ago, and has booked stays there for some 25 million guests. Bookings at residences in China have accounted for only one percent of Airbnb reservations in recent years, the company has reported.

Airbnb faced strong competition in China.

Total economic losses caused by natural disasters hit an estimated $72 billion in the first half of 2022, fuelled by storms and floods, Swiss reinsurance giant Swiss Re estimated Tuesday.

Though the figure is lower than the $91 billion estimate for the first six months of 2021, it is close to the 10-year average of $74 billion, and the weight is shifting towards weather-induced catastrophes.

“The effects of climate change are evident in increasingly extreme weather events, such as the unprecedented floods in Australia and South Africa,” said Martin Bertogg, Swiss Re’s head of catastrophe perils.

The Zurich-based group, which acts as an insurer for insurers, said the losses were also propelled by winter storms in Europe as well as heavy thunderstorms on the continent and in the United States.

So-called secondary natural disasters like floods and storms — as opposed to major disasters such as earthquakes — are happening more frequently, the reinsurer said.

“This confirms the trend we have observed over the last five years: that secondary perils are driving insured losses in every corner of the world,” Bertogg said.

“Unlike hurricanes or earthquakes, these perils are ubiquitous and exacerbated by rapid urbanisation in particularly vulnerable areas,” he said.

“Given the scale of the devastation across the globe, secondary perils require the same disciplined risk assessment as primary perils such as hurricanes.”

Swiss Re said floods in India, China and Bangladesh confirm the growing loss potential from flooding in urban areas.

Man-made catastrophes such as industrial accidents added on a further $3 billion of economic losses to the $72 billion from natural disasters, taking the total to $75 billion — which is down on the $95 billion total for the first half of 2021.

– Insured losses at $38 bn –

Total insured losses stood at $38 billion: $3 billion worth of man-made disasters and $35 billion worth of natural catastrophes — up 22 percent on the 10-year average, said the Swiss reinsurer, warning of the effects of climate change.

February’s storms in Europe cost insurers $3.5 billion, according to Swiss Re estimates.

Australia’s floods in February and March set a new record for insured flood losses in the country at so far close to $3.5 billion — one of the costliest natural catastrophes ever in the country.

Severe weather and hailstorms in France in the first six months of the year have so far caused an estimated four billion euros ($4.1 billion) of insured market losses.

The Swiss group also mentioned the summer heatwaves in Europe, which resulted in fires and drought-related damage, without providing estimates at this stage.

A warming climate is likely to exacerbate droughts and thereby the likelihood of wildfires, causing greater damage where urban sprawl grows into the countryside, Swiss Re said.

“Climate change is one of the biggest risks our society and the global economy is facing,” said the group’s chief economist Jerome Jean Haegeli.

“With 75 percent of all natural catastrophes still uninsured, we see large protection gaps globally exacerbated by today’s cost-of-living crisis.”

Stock markets diverged on Monday as investors track a raft of corporate earnings reports while oil prices sank over concerns about Chinese demand.

London’s FTSE 100 and the Paris CAC 40 were down slightly by 0.1 percent respectively while the Frankfurt DAX was flat at the close.

Wall Street was up later in the afternoon after opening lower on the first day of August following a strong month in July.

Asian stock markets finished higher despite another disappointing reading on the health of the Chinese economy.

The closely watched Purchasing Managers’ Index of manufacturing activity shrank in July on the back of weak demand and the strict zero-Covid measures imposed in parts of the country.

While sweeping curbs have eased in major hubs such as Shanghai and Beijing, sporadic lockdowns in other cities and towns have kept businesses and consumers worried with few signs of the policy easing.

The China data sent oil prices sharply lower, with the international benchmark, Brent, slipping just under $100 per barrel while the main US contract, WTI, fell by five percent to around $94.

“Oil prices were under pressure after weak Chinese manufacturing figures which really show the continuing impact of lockdowns on the country’s economy,” said AJ Bell investment director Russ Mould.

“China remains one of the biggest consumers of oil and other commodities.” Mould said.

Traders are also waiting for another output decision by the OPEC+ group of major crude-producing nations on Wednesday.

– ‘Bullish’ HSBC –

In corporate news, Asia-focused lender HSBC provided another boost with a “bullish” outlook, alongside its intention to revert to quarterly shareholder dividends next year.

HSBC shares jumped by more than six percent in the British capital. 

Other major corporate earnings reports this week include those from oil giant BP, US ride-hailing firm Uber, Japanese automaker Toyota and Chinese tech giant Alibaba.

Last week, strong earnings from US titans Amazon and Apple sparked healthy Wall Street gains and eased concerns about the economic impact of surging inflation and rising rates.

That came after investors took Federal Reserve chief Jerome Powell’s comments Wednesday to indicate the US central bank could start slowing down its monetary tightening, providing a much-needed boost to stocks.

The Bank of England is expected to deliver a bumper 0.5-percentage-point interest rate hike this Thursday to combat rocketing inflation.

“Sharp hikes by the US Federal Reserve and European Central Bank in July make it all the more likely that it will pull the trigger on an outsize rate hike,” Markets.com analyst Neil Wilson told AFP.

Global central banks are ramping up borrowing costs in an attempt to get a handle on runaway consumer price inflation.

Investors will also be looking ahead to critical US employment data out on Friday.

“If we start to see weakness in employment again, then this will further worry investors about the health of the world’s largest economy,” said Fawad Razaqzada at City Index and FOREX.com.

– Key figures at around 1545 GMT –

New York – Dow: UP 0.2 percent at 32,923.84 points

EURO STOXX 50: FLAT at 3,706,62

London – FTSE 100: DOWN 0.1 percent at 7,413.42 (close)

Frankfurt – DAX: FLAT at 13,479.63 (close)

Paris – CAC 40: DOWN 0.1 percent at 6,436.86 (close)

Tokyo – Nikkei 225: UP 0.7 percent at 27,993.35 (close)

Hong Kong – Hang Seng Index: UP 0.1 percent at 20,165.84 (close)

Shanghai – Composite: UP 0.2 percent at 3,259.96 (close)

Euro/dollar: UP at $1.0275 from $1.0228 Friday

Pound/dollar: UP at $1.2272 from $1.2189 

Euro/pound: DOWN at 83.73 pence from 83.89 pence

Dollar/yen: DOWN at 131.72 yen from 133.25 yen

Brent North Sea crude: DOWN 4.3 percent at $99.46 per barrel

West Texas Intermediate: DOWN 5.4 percent at $93.27 per barrel

burs/raz