Asian stocks decline amid tensions over Pelosi's visit to Taiwan

Asian shares have been mostly lower amid concerns about regional stability as an expected visit by US House Speaker Nancy Pelosi to Taiwan prompted threats from Beijing.

Benchmarks headed downward across the board in the region in early trading on Tuesday, including Japan, China, South Korea and Australia.

US long-term Treasury yields dropped to a four-month low, pulling the US dollar down, amid a bid for safer assets after China threatened repercussions in the event of the visit by Pelosi to the self-ruled island, which China claims as its territory. Crude oil also sank.

Japan's benchmark Nikkei 225 declined 1.4 percent to 27,594.73. South Korea's Kospi slipped 0.5 percent to 2,439.62. Hong Kong's Hang Seng dropped 2.5 percent to 19,675.87, while the Shanghai Composite dove 2.3 percent to 3,186.27.

Meanwhile, Australian stocks pared declines and the Aussie dollar weakened after the central bank raised the key rate by an as-expected 50 basis points, with markets interpreting changes to the accompanying policy statement as dovish.

Taiwan visit tensions

China sees Taiwan as its own territory and has repeatedly warned of “serious consequences” if the reported trip to the island goes ahead. 

Pelosi has said she is visiting Singapore, Malaysia, South Korea and Japan for talks on a variety of topics, including trade, Covid-19, climate change and security.

While there have been no official announcements, local media in Taiwan reported Pelosi will arrive on Tuesday night, making her the highest-ranking elected US official to visit in more than 25 years.

The week began with China, Europe and the United States reporting weakening factory activity, with that in the US decelerating to its lowest level since August 2020.

That sank crude, with Brent futures edging down to $99.27 a barrel on Tuesday after losing almost $4 overnight. 

US West Texas Intermediate futures also eased to $93.26, extending Monday's almost $5 slide.

The benchmark 10-year US Treasury yield fell as low as 2.53 percent in Tokyo trade, the lowest since April 5, amid wagers the slowdown could spur the US Federal Reserve to ease off the policy-tightening pedal. 

The bonds also benefited from safety-seeking demand before Pelosi's Taiwan visit.

That helped the US dollar slide as low as 130.40 yen for the first time since June 6. The euro jumped as high as $1.0294, a level not seen since July 5.

The Taiwan dollar slipped to its lowest level in more than two years on the weaker side of 30 per US dollar.

READ MORE: US Pelosi's 'provocative' Taiwan visit to undermine ties — China