An Asian share index shed over 1%, with some of the steepest falls in Hong Kong, China and Taiwan. US and European futures were also in the red as July’s equity market rebound stumbles into August.

US House Speaker Nancy Pelosi is expected to visit Taiwan on Tuesday. She would become the highest-ranking American politician to visit the island in 25 years. China views Taiwan as its territory and has warned of consequences if the trip takes place.

The trip may end up being another “short-term dislocation” for markets but “it’s always concerning when they do happen,” Ayako Yoshioka, senior portfolio consultant at Wealth Enhancement Group, told Bloomberg Radio.

The offshore yuan dipped and the Taiwanese dollar weakened. A relatively firm dollar gauge and gains in the yen hinted at a mood of caution. Gold climbed.

Treasuries advanced, lowering the 10-year yield to 2.52%. Bonds globally have pushed higher in the wake of data suggesting factory output is shrinking or cooling in key economies alongside moderating input prices. 

Investors are also keeping a wary eye out for more potentially hawkish comments from Federal Reserve officials about the need for higher interest rates to restrain elevated inflation. 

Expectations for how aggressive the Fed must be have receded because of recession risk, so any shift in those perceptions could stoke market volatility.

“You’re going to continue to see a lot of the Fed-speak continue to be fairly hawkish,” Larry Adam, chief investment officer at the private client group at Raymond James Financial, said on Bloomberg Television. But he expects easing inflationary pressures to allow the Fed to be “a little bit more accommodative as we head into the back half of the year”.

The prospect of a demand slowdown has sapped oil, leaving it around $93 a barrel. Oilseed and grain futures fell after the first grain ship since Russia’s invasion left Ukraine, heralding some relief for a tight global food market.

In Australia, the central bank is poised to lift borrowing costs for a fourth month, portending an economic slowdown in a campaign to get price pressures under control. The nation’s shorter-maturity bond yields advanced.

What to watch this week:

• Airbnb, Alibaba and BP are among earnings reports
• Reserve Bank of Australia rate decision, Tuesday
• US JOLTS job openings, Tuesday
• Chicago Fed president Charles Evans, St Louis Fed president James Bullard due to speak at separate events, Tuesday
• OPEC+ meeting on output, Wednesday
• US factory orders, durable goods, ISM services, Wednesday
• BOE rate decision, Thursday
• US initial jobless claims, trade, Thursday
• Cleveland Fed president Loretta Mester due to speak, Thursday
• US employment report for July, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.4% as of 10:51 a.m. in Tokyo. The S&P 500 fell 0.3%
• Nasdaq 100 futures shed 0.5%. The Nasdaq 100 fell 0.1%
• Japan’s Topix index dropped 1.8%
• Australia’s S&P/ASX 200 index shed 0.3%
• South Korea’s Kospi index declined 0.7%
• Hong Kong’s Hang Seng index fell 2.3%
• China’s Shanghai Composite index was down 1.9%
• Euro Stoxx 50 futures dropped 0.6%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro was at $1.0270, up 0.1%
• The Japanese yen was at 130.69 per dollar, up 0.7%
• The offshore yuan was at 6.7878 per dollar, down 0.1%

Bonds

• The yield on 10-year Treasuries declined five basis points to 2.52%
• Australia’s 10-year yield fell seven basis points to 2.99%

Commodities

• West Texas Intermediate crude was at $93.24 a barrel, down 0.7%
• Gold was at $1,776.84 an ounce, up 0.3%. BM