Asian Shares Rise Amid AI Optimism, Shrugging Off Trump's Tariffs
Asian equity markets experienced a rise, driven in part by enthusiasm surrounding artificial intelligence in China. The gains were recorded despite former President Donald Trump's imposition of tariffs on Colombia, which dampened risk appetite in other regions.
Market Performance
Equity indices in Japan and Hong Kong advanced, while mainland Chinese shares remained flat after initial gains. Chinese tech companies affiliated with DeepSeek's business model surged after the AI startup gained traction. Conversely, US futures slid in Asia due to concerns that the Chinese app could potentially threaten US technological dominance.
Currency and Fixed Income Markets
The US dollar witnessed a modest increase, while Treasuries also rose, reflecting market caution in the wake of Trump's tariffs against Colombia for refusing to accept deported migrants. The Mexican peso experienced a decline.
Artificial Intelligence in China
"DeepSeek demonstrates the feasibility of developing capable AI models at a lower cost," said Vey-Sern Ling, Managing Director at Union Bancaire Privee. "It has the potential to disrupt the investment case for the entire AI supply chain, which has been fueled by substantial spending from a select few hyperscalers."
Broader Market Sentiment
Despite the optimism surrounding AI in China, the overall investor sentiment across asset classes has deteriorated following Trump's tariff move on Colombia. The decision poses a threat to the global market rebound witnessed last week, which was triggered by Trump's reluctance to impose immediate levies on goods from Mexico, Canada, and China, initially alleviating fears of an impending global trade war.
Other Notable Developments
* China's factory activity unexpectedly contracted in January due to reduced production in anticipation of the Lunar New Year holiday.
* Markets in Taiwan, South Korea, and Australia remained closed on Monday for holidays.
* In commodities, oil prices fell in response to Trump's trade curbs on Colombia, highlighting risks to the global economy and trade flows.
Fed Rate Decision
The US Federal Reserve is widely expected to maintain interest rates unchanged at the conclusion of its two-day meeting on Wednesday. This will mark the first pause in the rate-cutting cycle that commenced in September.
Key Events This Week
* ECB President Christine Lagarde's speech on Monday
* US consumer confidence and durable goods data on Tuesday
* BoE Governor Andrew Bailey's remarks on Wednesday
* US rate decision and Tesla, Microsoft, Meta, and ASML earnings announcements on Wednesday
* ECB rate decision and Eurozone economic data on Thursday
* US GDP, personal income, and spending figures on Thursday