The S&P 500 futures experienced a significant drop of 1.6%, erasing almost two days of gains as investors reacted to uncertainty surrounding U.S. trade policy. This drop was driven by concerns over potential new tariffs targeting Chinese semiconductors and pharmaceuticals. At 8:00 A.M. GMT, futures on the benchmark index were down over seven points from the previous close.
Bitcoin, on the other hand, continued to underperform compared to other global assets over the past 24 hours. Trading around $83,400, the digital asset moved sideways after retracing steep overnight losses, deviating from the trend of traditional markets shifting towards safe-haven assets like gold and bonds.
The divergence in asset performance is evident in the market behavior over the past day. While gold and U.S. 10-year bond prices saw gains, equities faced selling pressure. E-mini S&P futures dropped 2.06%, and oil slid 1.13%, reflecting a renewed sense of macroeconomic caution. This caution was fueled by the confirmation that U.S. tariffs on Chinese imports have reached 145% and a new national security investigation into Chinese semiconductor and pharmaceutical exports.
The market response to rising U.S.-China tensions is seen in the defensive allocation decisions made by investors. With Chinese exports to the U.S. declining and concerns about weakened exports and capital expenditure mounting, markets are increasingly seeking hedges and liquid assets. While gold has seen a surge in demand, Bitcoin’s stagnation suggests a reassessment of its role in macro hedging portfolios.
Semiconductor tensions have further fueled uncertainty in the market, with Nvidia disclosing restrictions on exports of its H20 AI chip to China due to national security risks. This move, along with other semiconductor-related developments, has led to sharp declines in semiconductor-linked equities in Europe. The broader market sentiment was also impacted by macro data showing weaker-than-expected UK inflation and declining beer sales.
The current outlook suggests that traditional hedges like gold and sovereign bonds are reasserting themselves amid the escalating trade conflict. The muted response of Bitcoin, in contrast to other assets, raises questions about its sensitivity to global macro catalysts and its positioning in institutional portfolios during geopolitical shocks. As the White House emphasizes that future negotiations with China are dependent on concessions, investors seem to be positioning themselves cautiously in light of the evolving market dynamics.
