Asian Markets Brace for Turmoil Amid AI Sell-Off

Summary:

Asian traders anticipate a turbulent Tuesday after a sharp sell-off on Wall Street sparked concerns about valuations in the artificial intelligence sector.

Key Points:

* A cheap AI model from DeepSeek triggered a selloff, leading to a 1.5% decline in the S&P 500 and a 3% plunge in the Nasdaq 100.
* Nvidia Corp., a major AI player, sank 17%, leading to the largest market-cap loss for a single stock in history.
* US equity futures remained steady, while Asian markets prepare for the Lunar New Year celebrations, with several markets closed on Tuesday.
* Treasury yields fell, with haven currencies like the yen and Swiss franc rising in demand.

AI Disruption Impacts Market Sentiment:

The AI sell-off has challenged the bullish narrative that prevailed since President Donald Trump's re-election. The reliance of major stock indexes on AI-enabled firms, such as Nvidia, Apple, and Microsoft, has exposed them to significant losses.

Chinese Economy Falters:

Chinese economic activity unexpectedly contracted in January, with manufacturing and non-manufacturing gauges declining. This setback underscores the need for additional stimulus measures to prevent a slowdown.

Earnings Focus:

Traders will closely monitor earnings announcements from global tech giants like Microsoft and Apple this week. Profit growth projections for these companies are at their slowest pace in almost two years, raising concerns about meeting expectations.

DeepSeek Highlights:

DeepSeek is an open-source AI model developed in China. Its mobile app has gained popularity for its advanced reasoning capabilities. The company claims that its R1 release offers performance comparable to ChatGPT.

Corporate News:

* UBS Group AG has initiated job cuts in Switzerland.
* Estée Lauder Cos is reviewing its portfolio of beauty brands.
* AT&T Inc. exceeded expectations with its fourth-quarter results.
* Activist investor Ancora Holdings Group has nominated candidates for United States Steel Corp.'s board to block a takeover by Nippon Steel Corp.
* SoFi Technologies Inc. projected profits below analysts' estimates.
* MicroStrategy Inc. purchased Bitcoin for the 12th consecutive week.

Key Economic Events This Week:

* US consumer confidence and durable goods, Tuesday
* Fed rate decision and press conference, Wednesday
* Canada rate decision, Wednesday
* Tesla, Microsoft, Meta, ASML earnings, Wednesday
* Eurozone ECB rate decision, consumer confidence, unemployment, GDP, Thursday
* US GDP, jobless claims, Thursday
* Apple, Deutsche Bank, Thursday
* ECB rate decision and press conference, Thursday
* US personal income & spending, PCE inflation, employment cost index, Friday

Market Movements:

* Hang Seng futures up 0.8%
* S&P/ASX 200 down 0.2%
* Nikkei 225 futures down 1.1%
* Bloomberg Dollar Spot Index up 0.1%
* Euro down 0.4% to $1.0450
* Japanese yen down 0.2% to 154.82 per dollar
* Bitcoin up 0.7% to $102,047.14
* 10-year Treasury yield down nine basis points to 4.53%
* Australia's 10-year yield down six basis points to 4.41%