The escalation of commercial tension between the United States and China is once again in the spotlight as new restrictions are set to be imposed, leaving a mark on stock markets worldwide.
Recently, global chip stocks have taken a hit, with ASML, Nvidia, and TSMC experiencing significant declines.
This follows reports of stricter export measures by the US to China and heightened geopolitical tensions fueled by remarks from former US President Donald Trump.
Experts anticipate a prevailing somber sentiment among investors during European trading hours.
The pan-European tech index STOXX 600, after registering its largest single-day percentage drop since December 2022, is expected to attract attention once again.
The tech index was mainly dragged down by ASML’s performance.
As Asian stocks, especially chip-related shares, tumbled and concerns grew over a potential escalation in trade tensions between the US and China, the Japanese yen strengthened to a six-week high amid suspected interventions by Tokyo.
Meanwhile, the dollar remained near a four-month low against a basket of currencies.
Federal Reserve officials’ comments have further bolstered expectations for a rate cut in September, keeping gold prices close to record highs.
Additionally, the Eurozone awaits the ECB’s monetary policy decision on rates today.
A recent report suggesting that the US is contemplating stricter restrictions on exporting advanced semiconductor technology to China triggered a significant sell-off in chip stocks, leading to a decline in the Nasdaq overnight.
ASML shares in the Netherlands plummeted by 11%, while Tokyo Electron closed nearly 7.5% lower.
Companies like Arm, AMD, Marvell, Qualcomm, and Broadcom saw losses exceeding 7% by the end of the session.
Market participants seem to attribute the tech sector’s recent struggle to talks of further trade restrictions on China, which are weighing on industry demand prospects.
Despite exceeding market expectations in the second quarter, ASML’s shares took a hit, considering that 49% of its sales during the period came from China, highlighting the company’s vulnerability to stricter regulations.
ASML is a crucial manufacturer of machines required to produce the world’s most advanced chips.
In addition to trade tensions, comments made by Trump have further fueled negative sentiments towards semiconductor stocks.
In an interview with Bloomberg Businessweek, the former president suggested that Taiwan should pay the US for defense, casting doubts on the US commitment to defend Taiwan in case of a Chinese attack.
Taiwan Semiconductor Manufacturing Co shares closed Wednesday down by 2.4%, reflecting investor concerns in the midst of these geopolitical uncertainties.
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