Asian Stocks Surge on AI Optimism, While US-EU Tensions Dent Sentiment
Asian equity markets gained ground on Monday as optimism surrounding artificial intelligence (AI) boosted technology stocks in Hong Kong and China, while investors remained cautious over escalating trade tensions between the US and European Union (EU) and the ongoing war in Ukraine.
Tencent Holdings Ltd. led the surge in Hong Kong, climbing as much as 7.8% and extending its recent rally fueled by the debut of DeepSeek, an AI-driven platform. An index tracking Asian stocks rose to its highest level since November, supported by a surge in tech companies.
China's tech sector rally gathered momentum following DeepSeek's breakthrough in AI, which spurred a 1.3 trillion dollar gain in Chinese equities. A potential meeting this week between President Xi Jinping and e-commerce giant Alibaba's founder Jack Ma could further fuel optimism.
However, the positive sentiment was tempered by growing discord between the US and Europe, which weighed on German and French bond futures. "The growth momentum in China could gain new life given AI developments," said Tai Hui, Asia-Pacific Chief Market Strategist at JPMorgan Asset Management. "The China-AI story continues to unfold."
Goldman Sachs Group Inc. increased its MSCI China index target amid optimism over the country's tech advancements. Conversely, investor Michael Burry reduced his holdings in Chinese tech stocks just before DeepSeek's breakthrough.
Market volatility persisted during Asian trading hours, with the MSCI Asia Pacific index eroding some of its earlier gains. US President Donald Trump's tariff plans drew threats of retaliation, while Vice President JD Vance criticized long-time European allies at a security conference over the weekend.
The ongoing war in Ukraine has sidelined the EU in efforts to negotiate peace, which raises concerns that European governments may increase defense spending. Upgrading defenses and supporting Ukraine could cost major European powers an additional 3.1 trillion dollars over 10 years, according to Bloomberg Economics estimates.
Elsewhere in Asia, Westpac Banking Corp. shares declined by up to 6.2% following a dip in profits and margins. Japan's economy expanded for a third consecutive quarter, driven by increased investment and improved net exports.
Commodities witnessed a downturn, with oil extending its losses to a fourth day due to potential supply increases from Iraq and Russia. Trump's push to end the Ukraine war also contributed to the decline. Gold, meanwhile, edged higher.