Perfect storm: Nvidia loses $5.5B, Fed signals inflation spike, WTO forecasts first trade contraction since 2020

_{This article was developed in collaboration between IG's editorial team and AI technology}

Global markets face triple threat

Global markets plunged as a triple shock rattled investors: Nvidia faces a staggering $5.5 billion charge from US restrictions on China chip exports, Federal Reserve Chair Powell warned of persistent tariff-induced inflation and the WTO dramatically reversed its trade forecast from 2.7% growth to a 0.2% contraction—the first predicted decline since the pandemic.

Global market snapshot

• ASX 200: +0.13%
• Wall Street: -1.7%
• US 500: -2.2%
• US Tech 100: -3.1%
• Europe: EU Stocks 50 -0.2%, Germany 40 +0.3%
• Gold: +3.6% to $US3,357/ounce
• Brent crude: +2% to $US65.99/barrel
• Iron ore: -0.7% at $US98.05/tonne
• Bitcoin: +0.7% to $US84,647

Australian market braces for data releases amid global uncertainty

Australian investors are focusing on key economic data releases today, with the March employment report due at 11:30am. Economists expect a rebound of around 40,000 jobs following February's unexpected 52,800 slump, with the unemployment rate forecast to hold steady at 4.1%.

The jobs data takes on added significance with Reserve Bank of Australia (RBA) rate cut expectations mounting. According to Refinitiv data, about 69% of market participants anticipate a 0.25% rate cut at the RBA's May meeting, while a growing number are betting on a more aggressive 0.5% reduction. Very few expect rates to remain on hold, reflecting the shifting economic outlook.

In the resources sector, global miner BHP Group reported a slight decline in third-quarter iron ore production, as strong volumes were offset by weather disruptions from tropical cyclones Zelia and Sean. Despite these challenges, BHP achieved record nine-month output from its Central Pilbara operations, benefiting from the completed ramp-up of South Flank and a 13% increase in mining activity.

Tech sector reels from Nvidia's China chip export restrictions

The technology sector is leading market declines after Nvidia revealed it would take a $5.5 billion charge related to new US government restrictions on chip exports to China. The company's shares tumbled nearly 7% after announcing it requires a special license to ship its H20 graphics processing units to China, with no indication of when this requirement might end.

The ripple effects spread across the semiconductor industry, with Advanced Micro Devices falling 6.5% as it faces similar restrictions, forcing the company to take a charge of up to $800 million. Asian chipmakers felt the impact as well, with Samsung Electronics and SK Hynix dropping approximately 4%, while Taiwan Semiconductor Manufacturing Company fell 2.5%.

Apple bucked the trend earlier in the week, rising 6.5% following reports that smartphones and computers would be exempt from the latest round of tariffs. However, these gains were partially erased in Wednesday's broader market decline.

Fed warns of inflationary impact as markets slide

Federal Reserve Chair Jerome Powell cautioned that Trump's tariffs would create a "challenging scenario" for monetary policy and likely worsen inflation pressures. Speaking to The Economic Club of Chicago, Powell noted that while the US economy remained well-positioned, the administration's policy changes in trade, immigration, fiscal policy and regulation were creating significant uncertainty.

"Those policies are still evolving and their effects on the economy remain highly uncertain," Powell said, adding that tariffs would cause "at least a temporary rise in inflation. The inflationary effects could also be more persistent."

Markets reacted negatively to Powell's comments, with the US 500 ending the day down 2%, the US Tech 100 falling 3% and Wall Street dropping 1.7%.

Retail and e-commerce sectors prepare for price increases

Chinese e-commerce platforms Temu and Shein have announced price increases starting April 25 due to the US tariffs and crackdown on low-value imports. Both companies had benefited from the "de minimis" exemption that allowed duty-free entry for merchandise priced below $800, enabling them to keep prices low.

Their nearly identical letters to customers encouraged shoppers to purchase "now at today's rates" before the price hikes take effect. The companies are reportedly exploring increased sourcing from Vietnam to potentially allow goods to continue entering the US at lower tariff rates.

US retail sales showed a surprising 1.4% increase in March, compared to a 0.2% gain in February, suggesting consumers may have been accelerating purchases ahead of tariff implementation. However, sector-specific performance varied widely, with energy, healthcare, utilities, real estate and basic materials stocks showing relative strength amid the broader market decline.

WTO Director General Ngozi Okonjo-Iweala

WTO warns of trade contraction and economic slowdown

The World Trade Organization (WTO) has issued a stark warning that Trump's tariffs will send international trade into reverse this year, depressing global economic growth. The organisation had previously expected goods trade to expand by 2.7% in 2025 but now forecasts a 0.2% decline.

WTO Director General Ngozi Okonjo-Iweala expressed particular concern about the "decoupling" of the US and China, noting that trade between the two economic powers is expected to plunge by 81-91% without exemptions for tech products—a development she described as "tantamount to a decoupling of the two economies" with "far-reaching consequences."

The organisation has downgraded its global GDP growth forecast from 2.8% to 2.2% for 2025, warning that if Trump's paused "reciprocal" tariffs are reimposed after the current 90-day hiatus, the impact could be even more severe.

Outlook and trading considerations

As US-China tensions continue to escalate, investors and traders should consider several factors when navigating these turbulent markets:

• Sector-specific impacts vary significantly, with technology hardware, aviation and export-dependent industries facing the greatest headwinds
• Companies with flexible supply chains and diversified market exposure may demonstrate greater resilience
• Currency markets, particularly the US dollar and Chinese yuan, warrant close monitoring as trade tensions evolve
• Safe-haven assets may continue to attract inflows if uncertainty persists
• Potential diplomatic breakthroughs could trigger rapid market reversals, necessitating nimble positioning

While the immediate outlook remains challenging, diplomatic channels between the US and China remain open. Trump's statement that "the ball is in China's court" suggests room for negotiation, despite the Chinese foreign ministry's assertion that the US started the trade war and must "stop exerting extreme pressure" for meaningful dialogue to occur.

For Australian investors, maintaining risk management discipline and diversification across sectors and geographies will be crucial as the trade conflict continues to evolve.

• _{This article is intended for general informational purposes only and does not constitute financial advice. The content provides analysis of current market conditions and potential strategies that investors might consider, but these should not be taken as recommendations to buy, sell, or hold any specific investment. Market conditions are inherently unpredictable, and all investments carry risk. Past performance is not indicative of future results. Any investment decisions should be made in consultation with a qualified financial advisor who understands your personal circumstances, financial goals, and risk tolerance. The authors and publishers of this content accept no liability for any losses or damages arising from investment decisions made based on the information contained herein.}