Trading Day: When the chips are down

By Jamie McGeever

ORLANDO, Florida (Reuters) - TRADING DAY

Making sense of the forces driving global markets

By Jamie McGeever, Markets Columnist 

Tariffied once again

The respite was too good to last, and sure enough, it didn't. World stocks fell into a downward spiral on Wednesday led by tech losses after Washington said it is putting new curbs on AI chip exports to China, marking an escalation in the global trade war.

The Trump administration's latest broadside sparked huge demand for safe-haven assets like gold, the Swiss franc and U.S. Treasuries, even though Fed Chair Jerome Powell signalled he is in no rush to cut interest rates.

If U.S. Big Tech had acquired a safe-haven status in the eyes of some investors in recent years, it is disappearing fast. More on that and more below, but first, a round-up of the day's main market moves. I'd love to hear from you, so please reach out to me with comments at . You can also follow me at @ReutersJamie and @reutersjamie.bsky.social. 

If you have more time to read today, here are a few articles I recommend to help you make sense of what happened in markets.

1. In a fog of uncertainty, Fed policy storm could beapproaching 2. WTO slashes 2025 trade growth forecast, warns of deeperslump 3. US-China decoupling is crossing a Rubicon 4. EXCLUSIVE-Nvidia kept some China customers in the darkabout new US chip clampdown, sources say 5. Record gold crowded by one mega player: Mike Dolan

Today's Key Market Moves

* Wall Street falls, dragged lower by tech - Nasdaq -3%,S&P 500 -2.2%, Dow -1.7%. The Philadelphia semiconductor indexand the Roundhouse 'Magnificent 7' ETF both fall 4%. * Nvidia falls nearly 7% - at one stage it was down 10% -wiping some $175 billion off its market cap. AMD shares fall7.4%. * Chinese tech shares listed in Hong Kong fall 3.7%. * Safe-haven gold surges 3.4% to a new high of $3,342/oz,and the Swiss franc is the biggest gainer in the G10 FX space,rallying 1% against the dollar. * The dollar index falls 0.9%, back down to last week'sthree-year low. * The Canadian dollar underperforms, gaining only 0.6% eventhough the Bank of Canada paused its easing cycle and held ratessteady at 2.75% in what traders and economists had said was aclose call. * Nikkei and DAX futures point to falls of around 0.2% and0.5%, respectively, at the open in Japan and Germany onThursday. * Oil rises nearly 2% on supply concerns after the U.S.issues new sanctions targeting Chinese importers of Iranian oil.

When the chips are down, really down

After a few days of relative calm, investors buckled up on Wednesday as the Trump administration's latest trade war salvo sent world markets reeling again, with the big loser being Big Tech.

The Trump administration clearly has China in its sights but it is U.S. firms - including the biggest cash generators Wall Street has ever seen, like Apple and Nvidia - that are being caught in the crossfire.

Last week it was Apple, and the White House backed down. Will the damage done to Nvidia and others on Wednesday prompt a similar rethink?

Economic signals from China and the U.S. on Wednesday were surprisingly positive, with U.S. retail sales in March and first quarter Chinese GDP growth beating forecasts. But these are rear-view mirror indicators, and if anyone needed it, Wednesday's news is a reminder that the outlook is pretty bleak.

Economists at Morgan Stanley and UBS this week cut their Chinese 2025 GDP outlooks to 4.2% and 3.4%, respectively. Anything close to the UBS forecast would be particularly alarming for Beijing, which is targeting growth of around 5%.

Morgan Stanley's economists estimate tariffs will knock 90 basis points off growth relative to their original forecast, which will only be partially offset by 60 bps of additional stimulus.

Although U.S. growth is slowing, Fed Chair Jerome Powell signaled on Wednesday the central bank will wait for "greater clarity" before deciding its next move on rates. He also said markets have been orderly and downplayed the risk of Fed intervention.

Massive selling of long-dated Treasuries last week raised fears that part of the bond market wasn't functioning smoothly. There was no sign of that on Wednesday, however, as bonds' 'safe haven' qualities pushed yields down as much as 5 basis points at the short end.

In Europe, eyes will turn to Frankfurt where the European Central Bank on Thursday will announce its latest policy decision and ECB President Christine Lagarde will offer her outlook. Market pricing suggests a 25 basis point cut is all but certain, with at least another two coming later this year.

And after Wednesday's rout, the focus in Asia on Thursday will stay on tech as Taiwan's TSMC reports first-quarter earnings. The world's largest contract chipmaker is expected to report a 34.2% increase in revenue to $25.318 billion from $18.87 billion a year ago, according to the mean estimate from five analysts based on LSEG data.

Tech and tariffs - a potent mix which roiled markets on Wednesday and will likely do so again sooner rather than later.

US Big Tech swaps 'safe haven' sheen for trade war target

Treasuries are not the only 'safe haven' U.S. asset getting the cold shoulder as investors around the world rethink their enthusiasm for all things America. The shadow over 'Big Tech' is darkening and lengthening too.

In recent weeks, the global trade war, the Trump administration's 'America First' agenda and its apparent disdain for the post-war world order have dramatically slowed inflows into U.S. markets, and in some cases, reversed them. What used to be considered some of the safest shelters from crisis are now looking a little flimsy.

It might seem a stretch to put shares of U.S. technology and chip companies, such as Nvidia, Apple, and Amazon, on par with IOUs of the federal government, but these cash-generating emblems of 'U.S. exceptionalism' certainly seemed like sure things up until recently.

As these firms' global dominance spread over the past decade and their market footprint reached an unprecedented size, they effectively become ATMs for shareholders, generating record profits running into the hundreds of billions of dollars.

In the fourth quarter of last year, the 'Magnificent Seven' - Nvidia, Apple, Amazon, Meta, Alphabet, Microsoft and Tesla - accounted for a record 35% of the S&P 500's market cap, with a combined valuation of around $17.5 trillion. Credit ratings on some, like Apple, are the same as the U.S. sovereign rating, and yields have even traded below Treasury yields on occasion.

Investors of all stripes wanted in, from domestic to foreign, retail to official.

And who could blame them? The 'Mag 7' appeared to offer the best of both investment worlds: a high income-generating asset and a safe-haven. So much so that the Swiss National Bank has a quarter of its $150 billion equity holdings in Apple, Nvidia, Microsoft and Amazon, and half of the $1.8 trillion Norwegian wealth fund's record $222 billion profit last year came from U.S. tech.

REALITY CHECK

But that sweet spot is gone. The 'American exceptionalism' narrative has been undermined, as the U.S. economy looks set to slow and America's AI invincibility has been shattered by China's DeepSeek. And now tech companies find themselves on the front line of the global trade war.

Washington is issuing new export licensing requirements for Nvidia's H20 AI chips to China. Nvidia said it faces $5.5 billion in charges, and its shares tumbled 9% on Wednesday, wiping nearly $250 billion off its market value and dragging the broader semiconductor index down 4%.

To be sure, U.S. tech has been getting slammed since mid-February, as investors have begun to re-evaluate the sunny outlook they had for the industry under a Trump presidency. The semiconductor index is now deep in a bear market. It has lost 30% in just two months and valuations have come down much more than the wider S&P 500.

U.S. Big Tech is suddenly vulnerable on multiple fronts. Tariffs and trade restrictions from Washington will bite, as will retaliatory moves from China. And if Europe really wants to hit America where it hurts, tech is an obvious target.

WHAT GOES UP...

But it's also worth remembering how much Big Tech outperformed on the way up. They were - and remain - incredibly profitable. According to LSEG figures, the Mag 7's net profit margin hit a record 25.8% in the fourth quarter, nearly double the S&P 500's 13.4%.

Nvidia's value rose 10-fold in two years to more than $3.5 trillion, Mag 7 stocks more than doubled between October 2023 and last December, and these companies accounted for almost all of the market's profit growth in 2023.

While that halved last year and is expected to decline further this year to around a third, there is still a lot of air left to come out of the balloon. According to Bank of America's latest global fund manager survey, 'long Mag 7' was the most crowded trade for 23 consecutive months until April.

And what was it replaced with? Long gold, one 'safe haven' that isn't giving up its title.

What could move markets tomorrow?

* TSMC earnings (Q1) * Japan trade (March) * Bank of Korea interest rate decision * European Central Bank interest rate decision * Germany producer price inflation (March) * U.S. weekly jobless claims * U.S. 5-year TIPs auction * U.S. Treasury Secretary Scott Bessent meets Japan EconomyMinister Ryosei Akazawa

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

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(By Jamie McGeever, editing by Nia Williams)