Image: Getty Images/ For illustrative purposes
US stock futures and Asian shares outside China slumped on Monday as investors weighed the implications of Chinese startup DeepSeek’s launch of a free, open-source artificial intelligence model to rival OpenAI’s ChatGPT.
Meanwhile, the dollar rose after US President Donald Trump threatened Colombia with retaliatory levies and sanctions for turning away military aircraft carrying deported migrants before a last-minute deal was agreed.
US Nasdaq Composite futures tumbled 2.3 per cent as of 06.34 GMT and S&P 500 futures sank 1.3 per cent.
Japan’s Nikkei dropped 0.9 per cent, reversing an initial advance. New Zealand’s equity benchmark slipped 0.2 per cent and Singapore’s Straits Times index eased 0.1 per cent.
At the same time, Hong Kong’s Hang Seng rallied 1 per cent and mainland blue chips added 0.1 per cent, even after data showed a surprise contraction in manufacturing this month.
Pan-European STOXX 50 futures dropped 0.9 per cent.
DeepSeek has the potential to disrupt the tech landscape
DeepSeek “has raised the spectre of disruption in the tech landscape, with its emergence suggesting that China can continue to make strides in the AI race despite US restrictions,” Yeap Jun Rong, a strategist at IG, wrote in a note.
It “seems to instil some concerns over US tech dominance”, putting “tech companies’ lofty valuation back under scrutiny”, he said.
In currencies, the dollar advanced 0.4 per cent against the Chinese yuan in offshore trading, and gained 0.4 per cent versus the Aussie and the New Zealand dollar, with the antipodean currencies tending to act as more liquid proxies for China’s currency due to close trade ties.
The Mexican peso slumped about 0.7 per cent and the Canadian dollar eased 0.2 per cent. The Colombian peso had yet to trade against the dollar but had rallied 3.4 per cent over the previous three sessions.
The euro eased 0.2 per cent to $1.0461. Sterling edged 0.1 per cent lower to $1.2457. The yen was little changed at 156.13 per dollar.
Dollar strength fleeting
China, Mexico and Canada face a nervy wait with Trump last week earmarking February 1 for additional tariffs on the US’ top trading partners.
However, Nomura strategist Naka Matsuzawa expects dollar strength on tariff worries to be fleeting.
“As a trend, Trump is taking a more realistic, less aggressive stance on tariffs,” Matsuzawa said.
“Bottom line: Trump doesn’t want big tariffs because he’s worried about inflation,” he said. “The dollar will be overall weaker.”
Trump last week soothed market concerns by saying he wanted to avoid tariffs on China, and said he could reach a trade deal.
The volatility across asset classes kicks off a crucial week for markets that will see the Federal Reserve and European Central Bank – among others – set monetary policy.
At the same time, many bourses have extended holidays this week for the Lunar New Year. Among them, South Korea and Taiwan were already closed on Monday. Markets in mainland China are shut from Tuesday and do not reopen until February 5.
Australia was closed on Monday for Australia Day.
Meanwhile, crude oil prices slumped after Trump on Friday reiterated his call for OPEC to cut oil prices.
Brent crude futures dropped 0.8 per cent to $77.85 a barrel, while US West Texas Intermediate crude lost 0.9 per cent to $74.00 a barrel.
Gold sank 0.7 per cent to $2,753 per ounce.
Leading cryptocurrency bitcoin slumped more than 5 per cent to below $100,000 for the first time in a week, and was last at $99,215.
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