When the chips are down

Making sense of the forces driving global markets

By Jamie McGeever, Markets Columnist 

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 signaled 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 jamie.mcgeever@thomsonreuters.com. You can also follow me at @ReutersJamie and @reutersjamie.bsky.social. 

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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 US 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 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.

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. But that sweet spot is gone. 

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