Morning Bid: Markets wobble over US-China wrangling

A look at the day ahead in European and global markets from Stella Qiu

It's been a sea of red in Asia so far on Wednesday, with new U.S. moves turning up the heat in the trade war with China, but at least the losses have been relatively shallow compared with other down days of the past few weeks.

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.

President Donald Trump continues pushing for maximum pressure on Beijing, which was excluded from the shocking reversal of his "reciprocal" tariffs. He has now ordered a probe into potential new tariffs on all U.S. critical minerals imports, which are heavily skewed towards China.

One positive is China's GDP data beat, with solid growth of 5.4% in the first quarter, but investors know it predates the U.S. hike in tariffs on China to a staggering 145%.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.3%, snapping a four-day winning streak. Hong Kong's Hang Seng index was the worst performer in the region with a drop of 2.3% as tech shares slumped.

Wall Street also felt the pain as Nasdaq futures slid 1.3%. The gloom is set to spread to Europe, with EUROSTOXX 50 futures pointing to a 0.7% drop at the open.

Trump says the ball is in China's court for a trade deal but Chinese President Xi Jinping for his part seems to be busy touring Southeast Asia. Trump says the two have a great relationship but Xi is showing no signs of backing down.

All this uncertainty fuelled the upward momentum in gold, with bullion up 1.3% at yet another record high of $3,275 per ounce.

Looking ahead, Britain will report inflation figures for March, with expectations centred on a further easing in the headline measure to 2.7%, from 2.8%. Core inflation likely also slowed a tad to 3.4%, from 3.5%.

Tame inflation numbers like those would give the Bank of England room to ease policy further. Markets imply an 80% probability of a cut in May.

Investors were less sure about the Bank of Canada policy meeting later in the day, pricing in just a 40% chance of easing as a general election looms at the end of the month.

Investors will also focus on U.S. retail sales data and a speech by Federal Reserve Chair Jerome Powell later in the day. Retail sales in March are likely to have surged 1.3%, though largely because consumers rushed to buy before tariffs kick in.

For Powell, traders are wondering if he will echo the surprisingly dovish tone set by his colleague Fed Governor Christopher Waller, or stay more balanced. A reprise of Waller would likely encourage markets to wager once more on aggressive rate cuts. Futures currently imply total Fed easing of 88 basis points for this year.

Key developments that could influence markets on Wednesday:

-- UK CPI for March

-- Bank of Canada rate decision

-- US retail sales data for March

-- Fed Chair Jerome Powell speaks on economic outlook

(By Stella Qiu; Editing by Edmund Klamann)

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