By Stella Qiu
SYDNEY (Reuters) -Shares fell in Asia on Wednesday as AI darling Nvidia took a hit from U.S. curbs on chip sales to China, highlighting the damage to come in a tit-for-tat global trade war, while gold hit a record and the safe-haven currencies jumped.
Treasury yields were steady ahead of a key speech from Federal Reserve Chair Jerome Powell later in the day. Traders are wondering if he will echo the surprisingly dovish tone set by his colleague Fed Governor Christopher Waller, or stay more balanced.
Overnight, Washington issued new export licensing requirements for Nvidia’s H20 and AMD’s MI308 artificial intelligence chips to China. Nvidia’s shares slumped 6% in after-hours trading, after it said the move would cost $5.5 billion.
“This disclosure is a clear sign that Nvidia now has massive restrictions and hurdles in selling to China,” said Daniel Ives, analyst at Wedbush Securities.
“The Street will take this news with clear nervousness worried these are the first shots fired in the tech battle between the US and China and Beijing/Xi are not just going to take this news and walk away.”
Separately, President Donald Trump ordered a probe into potential new tariffs on all U.S. critical minerals imports, on top of reviews into pharmaceutical and chip imports. Beijing is continuing to play hardball, having reportedly ordered airlines to suspend deliveries of Boeing aircraft.
The sell-off in Asian stocks gathered pace in the afternoon. S&P 500 futures fell 1.5% while Nasdaq futures slumped 2.3%.
The gloom is set to spread to Europe, with EURO STOXX 50 futures pointing to a 1.5% drop at the open.
On Wednesday, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.4%, snapping a four-day winning streak. Japan’s Nikkei dropped 1.6%.
Chinese blue chips fell 0.7% as investors failed to find much solace in some solid GDP data that predated the tariff increases in April. Hong Kong’s Hang Seng slumped 2.7%.
“Both countries seem to believe they have the upper hand, potentially prolonging the current stalemate for months to come,” said analysts at PGIM Fixed Income in a note to clients.
“China appears to have no intention of climbing down from its current stance on tariffs and instead views the current trade dynamics as an opportunity to make inroads with countries that export to the U.S.”
The White House said Trump is open to making a trade deal with China but Beijing should make the first move.
GOLD SHINES
All of the uncertainties left gold in an unstoppable position, with the bullion up 2% to hit another record high of $3,290 per ounce.
ANZ on Wednesday updated their forecast for gold to hit $3,600 an ounce by the year-end, arguing that the risk-off purchases for the asset are yet to pick up.
The step down in risk appetite is evident via rises in the Japanese yen and Swiss franc. The dollar lost 1.1% to 0.8145 Swiss franc and fell 0.7% to 142.32 yen.
Bank of Japan Governor Kazuo Ueda told the Sankei newspaper that the central bank may need to take policy action if U.S. tariffs hurt the Japanese economy, signalling the potential to pause the bank’s rate-hike cycle.
U.S. Treasuries, however, failed to draw support from the risk aversion and were steady on Wednesday.
The benchmark 10-year yield was steady at 4.325%, well off the recent high of 4.592%. The 30-year yield was little changed at 4.777%, also some 25 basis points lower from the high seen last week.
Oil prices were lower. Brent fell 1.1% at $63.99 a barrel, while U.S. crude also dropped 1.1% to $60.65 per barrel.
(Reporting by Stella Qiu; Editing by Saad Sayeed)
