TOKYO – Stocks rose in volatile trading across Asia on Wednesday and the dollar pared early gains as investors weighed the potential fallout from U.S. House Speaker Nancy Pelosi’s visit to Taiwan, which has angered China.
Bond yields were also helped as demand for the safest assets eased despite heightened tensions between the United States and China, which views Taiwan as a breakaway province.
“In the longer term, there will be more frictions between the U.S. and China,” said Redmond Wong, Greater China market strategist at Saxo Markets in Hong Kong. “We have already been seeing selling from overseas investors in Chinese equities.”
Japan’s Nikkei closed up 0.53 percent, rebounding from Tuesday’s two-week closing low, while Hong Kong’s Hang Seng gained 0.83 percent and Taiwan’s TAIEX index rebounded from earlier losses to gain 0.2 percent at the close.
MSCI’s broadest index of Asia-Pacific shares rose 0.19 percent, helped by the rally in Japan as bargain hunters came in following Tuesday’s decline to a two-week closing low.
Australia’s AXJO fell 0.41 percent and Chinese blue chips lost 0.13 percent.
“Obviously, as investors in China, we would not like to see tensions escalate,” said Thomas Masi, vice president and co-portfolio manager of the GW&K Emerging Wealth Strategy.
“And we don’t see the benefit necessarily of this trip, but there could be something that we don’t understand. On a risk-reward basis, should tensions ease, there’s a lot more upside in these stocks.”
FTSE futures were down 0.20 percent and Euro STOXX 50 futures dropped 0.08 percent ahead of markets opening in Europe.
U.S. stock futures jumped 0.32 percent, following the S&P 500’s 0.67 percent drop overnight.
A trio of Fed policymakers signaled on Tuesday that there would be no let up in the tightening campaign aimed at taming the highest inflation since the 1980s, even though it will take rates to a level that will more significantly curb economic activity.
Two of them, San Francisco Fed President Mary Daly and Chicago Fed President Charles Evans, are widely regarded as doves.
Traders now see a chance of around 39.5 percent that the Fed will hike by another 75 basis points at its next meeting in September.
The benchmark U.S. 10-year Treasury yields were around 2.71% in Tokyo, not far from the overnight high of 2.774 percent following a 14 basis point surge.
The U.S. dollar index, which gauges the currency against the yen and five other major peers, was 0.188% lower at 106.25, having rebounded as much as 1.43 percent overnight following its slide to a nearly one-month low at 105.03.
Gold rose 0.57 percent to $1,769.73 per ounce, but following a 0.68 percent retreat the previous session.