Asian equities saw a downturn on Thursday, driven by a mix of global geopolitical uncertainty and disappointing corporate results. Investors were rattled by the latest tariff announcements from US President Donald Trump and uninspiring earnings from Nvidia Corp., which failed to meet the market’s high expectations.
Stock markets in China, along with tech stocks in Hong Kong, fell in response to Trump’s announcement of a 25% tariff on European Union goods. Additionally, previously announced tariffs on Mexico and Canada are set to take effect on April 2, further intensifying concerns among investors. European equity futures also declined by up to 0.9%, reflecting the broader global sentiment.
Trump’s statements on tariffs were met with confusion as they appeared to contradict previous messages regarding their timing and scope. The lack of clarity regarding the implementation of tariffs only deepened investor uncertainty.
Nvidia’s after-hours performance further contributed to the market’s unease. While the chipmaker posted solid quarterly results, they were far from spectacular, leaving investors, who have become accustomed to stellar performances, disappointed. Charu Chanana, chief investment strategist at Saxo Markets, noted that Nvidia’s performance lacked the “spark” that typically drives market momentum. This disappointment suggests that US stocks may struggle to find near-term drivers, which could fuel a shift of capital into European and Chinese markets.
Chanana also pointed out that Nvidia’s results weren’t sufficient to alleviate broader concerns over geopolitical tensions, tariffs, and the evolving dynamics of artificial intelligence trade.
Meanwhile, new research suggests that Trump’s recent tariffs on Chinese imports may have a greater negative impact on the US economy than previously anticipated. Marvin Loh from State Street commented that the administration’s contradictory statements regarding tariffs are leaving investors uncertain. The ongoing debate about whether the President will delay or intensify his plans adds to the market’s volatility.
On the currency front, the US dollar continued its upward trajectory, rising for the second consecutive day. Treasuries, on the other hand, saw a slight dip after a rally earlier in the week. This has led some investors to bet that the Federal Reserve may soon shift its focus from combating inflation to addressing the growing concerns about economic slowdown. Traders are pricing in the likelihood of two quarter-point interest rate cuts by the Fed later this year, with a third expected in 2024. Market strategists at Morgan Stanley suggest that a further drop in rates could see the 10-year Treasury yield surpass 4%.
In Japan, the yen hovered around 149 per dollar, following a stable session on Wednesday. Japan’s top currency official expressed no concern over the growing market expectations of interest rate hikes by the Bank of Japan, which had recently helped the yen reach a four-month high.
Corporate news saw Nissan Motor Co.’s stocks and bonds rise on the back of speculation regarding a leadership change. Toyota Motor Corp. also showed promise, with a slow but steady start to the year, as sales abroad struggled but were offset by a rebound in the Japanese market.
Hong Kong’s stock exchange reported its highest quarterly profit in nearly four years, bolstered by China’s stimulus measures which have significantly increased trading and listing volumes.
Nvidia’s Cautionary Outlook
In a concerning development, Nvidia issued a warning that its gross profit margins would likely be tighter than expected, partly due to the imminent launch of its new Blackwell chip design. The company also expressed concerns that ongoing US tariffs could further impact its performance.
This comes at a precarious time for the AI industry, with Nvidia’s shares dipping this year due to worries that data center operators may scale back their spending. Furthermore, the rise of DeepSeek, a Chinese startup developing low-cost AI chatbot technology, has raised fears that the demand for Nvidia’s high-performance chips could diminish.
Edward Chan, senior investment analyst at Mirae Asset Global Investments, noted that China’s AI industry, once considered far behind that of the US, is now gaining ground with access to more competitive models, which could disrupt the global AI landscape.
Meanwhile, top global commodity traders are seizing the opportunity to ship copper to the US from Asia, prompted by Trump’s looming threat of import tariffs on the metal, which presents a potentially lucrative profit opportunity.
Bitcoin saw a slight uptick, rising to $85,000 after dipping below $84,000 overnight. Meanwhile, oil prices steadied near their lowest close of the year, and gold prices experienced a decline.
As the global economic landscape remains uncertain, investors will continue to navigate through the shifting dynamics of tariffs, corporate earnings, and market expectations.
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