US-China trade fight slams stocks, sends gold to record high

By Lawrence Delevingne and Harry Robertson

BOSTON/LONDON (Reuters) -Global shares fell sharply on Wednesday as U.S. restrictions on chip sales to China and continued tariff uncertainty battered tech stocks, while gold traded at record highs and support for the dollar continued to erode. 

Washington issued new export licensing requirements for sales to China of Nvidia's H20 and AMD's MI308 artificial intelligence chips. Nvidia said the move would cost it $5.5 billion and its shares slumped nearly 7%.

MSCI's gauge of stocks across the globe fell about 1.5%.

"Capital markets remain caught between news about new tariffs and, on the other hand, about tariff negotiations or suspensions," Paul Christopher, a strategist with the Wells Fargo Investment Institute, wrote in a note on Wednesday.

The Dow Jones Industrial Average fell 1.7%, the S&P 500 dropped 2.2%, and the tech-heavy Nasdaq Composite slumped 3.1%. 

U.S. Federal Reserve Chair Jerome Powell said on Wednesday the Fed would wait for more data on the economy's direction before changing interest rates, and characterized recent market volatility as a logical processing of the Trump administration's dramatic shifts in tariff policy.

"Powell is doing what the rest of us are doing - waiting and watching," Jamie Cox, managing partner for Harris Financial Group, said in an email. "The Federal Reserve won't act unless and until either the labor market turns or there is a systemic risk, such as a breakdown in the payment system."

Data on Wednesday showed that U.S. retail sales surged in March as households boosted purchases of motor vehicles ahead of tariffs, though concerns about the economic outlook are hurting discretionary spending.

President Donald Trump on Tuesday ordered a probe into potential new tariffs on all imports of critical minerals, 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.

EUROPE, ASIA SHARES ALSO LOWER

European stocks fell, with the STOXX 600 index down 0.2%, also hit by declining tech company shares.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.8%, snapping a four-day winning streak. Chinese blue chips rose 0.3%, as investors also digested some solid GDP data that pre-dated the tariff increases in April, but the Hong Kong Hang Seng index fell 1.9%.

"The broader focus still remains on tariffs," said Aneeka Gupta, economist and strategist at WisdomTree.

"In China, we've had the restrictions raise concerns that access to global tech hardware would be further choked off," Gupta said. "That's also resulting in a bit of a risk-off sentiment in the market."

The White House said Trump is open to making a trade deal with China but Beijing should make the first move.

The World Trade Organization sharply cut its forecast for global merchandise trade from solid growth to a decline on Wednesday, saying further U.S. tariffs and spillover effects could lead to the heaviest slump since the height of the pandemic.

TREASURIES DOWN, GOLD SHINES

The uncertainties left gold in an unstoppable position, with bullion hitting another record high of $3,339 per ounce, last up 3.5%.

Australian bank ANZ on Wednesday updated its forecast for gold to hit $3,600 an ounce by year-end, saying safe-haven demand for the asset would accelerate.

U.S. Treasury yields fell after comments from the Fed's Powell stoked concerns about economic growth and inflation pressures.

The benchmark 10-year Treasury yield fell 4 basis points to 4.283%, after yields surged last week on concerns about the stability of the U.S. economy.

Traders of short-term interest-rate futures are betting the Fed resumes rate cuts in June and that by year-end the policy rate, currently in the 4.25%-4.50% range, will be a full percentage point lower.

The U.S. dollar index, which tracks the currency against six peers, slid 0.7% to around its lowest since April 2022 in a sign investors remained cautious about U.S. assets.

The Japanese yen and Swiss franc, seen as safe assets during market turbulence, rallied around 0.8% and 1.2%, respectively. 

The yen was trading around its highest level since September while the franc was at its highest in 10 years.

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, signaling the potential to pause the bank's rate-hiking cycle.

Oil pricesrose around 2% to a two-week high on concerns about global supplies after Washington issued new sanctions targeting Chinese importers of Iranian oil.

In cryptocurrencies, bitcoin added 0.5% to $84,389, down nearly 10% for the year. 

(Reporting by Lawrence Delevingne in Boston, Harry Robertson in London and Stella Qiu in Sydney; Editing by Bernadette Baum, Joe Bavier, Emelia Sithole-Matarise and Rod Nickel)