China's AI Surprise Sends Shockwaves Through Global Markets

0

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

The move by DeepSeek has stirred significant market reactions, particularly in Europe and Asia, where shares took a noticeable hit. The pan-European STOXX 600 index, largely driven by its technology sector, saw a decline, with the Euro STOXX 50 dropping 1.4% during early trading hours.

Meanwhile, the tech-focused STOXX 600 technology index experienced a steep fall of 4.6%, marking its most significant one-day decline since October. Similarly, US futures linked to tech giants also took a dive, with Nasdaq Composite futures plummeting by more than 3.1% and S&P 500 futures decreasing by 2.0%.

George Lagarias, an investment strategist at Forvis Mazars, commented on the situation by stating, "China and DeepSeek say, at the very least, that they can deliver what ChatGPT can deliver today at a fraction of the cost-markets question the narrative that has been underpinning the whole market. It's a very frothy market, so it doesn't really take that much for investors to take some profit."

This development has particularly impacted AI bellwether companies like Nvidia, which saw its shares decrease by over 7.0% in pre-market trading. The ripple effect also reached Asian markets, with Japan's Nikkei dropping 0.9%, New Zealand's benchmark index slipping 0.2%, and Singapore's Straits Times index dipping 0.1%. Despite this, Hong Kong's Hang Seng saw a rally of 0.7% amid a contraction in Chinese manufacturing. On the mainland, blue-chip stocks fell by 0.4%.

The currency markets also reacted to geopolitical tensions and tariff considerations. The US dollar dipped amid uncertainty regarding broad US import tariffs. Although US President Donald Trump had previously threatened Colombia with tariffs over deportation disputes, the situation was temporarily defused when Colombia agreed to accept the flights, putting US sanctions on hold.

In regional currency fluctuations, the dollar gained 1% against the Mexican peso and a slight 0.1% against the Canadian dollar. This uncertainty reflects unease as Trump hinted at potential tariff impositions on key US trading partners, which are anticipated to commence on February 1.

Nomura's strategist, Naka Matsuzawa, offered insights saying, "As a trend, Trump is taking a more realistic, less aggressive stance on tariffs." He added, "Bottom line: Trump doesn't want big tariffs because he's worried about inflation. The dollar will be overall weaker."

This tumultuous market backdrop signals a crucial week ahead for financial markets, as the Federal Reserve and European Central Bank, among others, are poised to announce monetary policy decisions. Concurrently, several Asian bourses extend their closures for the Lunar New Year celebrations, with South Korea and Taiwan markets already closed on Monday and China expected to remain shut until February 5.

Elsewhere, global commodity markets saw moderate movements. Brent crude futures inched up by 0.3% to $78.75 a barrel, and US West Texas Intermediate crude gained 0.2% to reach $74.80 a barrel. Gold, however, saw a slight decline of 0.3%, pricing at $2,764 per ounce. Cryptocurrency leader Bitcoin also witnessed a slump, falling over 5.0% to drop below $100,000, marking its first dip under that level in a week.

This article was inspired by insights from a Reuters report, originally authored by Samuel Indyk and Kevin Buckland.

Published:Tuesday, 28th Jan 2025
Source: Paige Estritori

Please Note: If this information affects you, seek advice from a licensed professional.

Share this news item:

Finance News

Clear

ASIC Calls for Improved Consumer Safeguards in Car Finance Sector

12 Dec 2025: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has recently conducted a comprehensive review of the nation's motor vehicle finance sector, uncovering significant issues that raise concerns about consumer protection and lending practices. - read more

Australia's Electric and Hybrid Vehicle Financing Soars in 2024

12 Dec 2025: Paige Estritori

Australia is witnessing a significant shift towards sustainable transportation, as evidenced by a remarkable surge in financing for electric and hybrid vehicles. In 2024, the Australian Finance Industry Association (AFIA) reported that over $6.17 billion was allocated to finance 104,835 electric and hybrid vehicles, marking a 50% increase from the previous year. - read more

Australia's Used Car Market Shows Signs of Cooling After Robust 2024

12 Dec 2025: Paige Estritori

The Australian used car market, which experienced significant growth throughout most of 2024, is now showing signs of deceleration, prompting industry experts to adopt a more cautious outlook for 2025. According to the 2024 Year That Was Automotive Insights Report (AIR) released by the Australian Automotive Dealer Association (AADA) in partnership with AutoGrab, total used car sales reached 2,324,805 units in 2024, marking a 12.1% increase compared to 2023. - read more

ASIC's Investigation Highlights Issues in Car Finance Sector

04 Dec 2025: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has recently conducted a comprehensive review of the nation's motor vehicle finance sector, uncovering significant issues that raise concerns about consumer protection and lending practices. - read more

Mid-Year Insights Show Used Car Supply Surging

04 Dec 2025: Paige Estritori

The Australian used car market is experiencing a significant shift, with a notable increase in vehicle listings contributing to a more balanced and stable marketplace. According to the Mid-2025 Automotive Insights Report (AIR) released by the Australian Automotive Dealer Association (AADA) in collaboration with AutoGrab, the first half of 2025 saw 1,589,491 used vehicles listed for sale. This figure represents an over 30% increase compared to the same period in 2024, indicating a substantial surge in supply. - read more

Australia to Cap High Debt-to-Income Home Loans from February to Curb Housing Risks

04 Dec 2025: Paige Estritori

In a proactive move to address escalating risks in the housing market, the Australian Prudential Regulation Authority (APRA) has announced the implementation of a cap on high debt-to-income (DTI) home loans. Effective from February 2026, this measure is designed to mitigate potential financial vulnerabilities arising from surging property prices and accelerated credit growth. - read more

ASIC's Investigation Highlights Issues in Car Finance Sector

26 Nov 2025: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has recently conducted a comprehensive review of the nation's motor vehicle finance sector, uncovering significant issues that raise concerns about consumer protection and lending practices. - read more

Click for more Finance News