China's AI Surprise Sends Shockwaves Through Global Markets

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
Author: Paige Estritori

Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.

Share this news item:

Finance News

Clear

Cigno Australia and BSF Solutions Penalised for Unlawful Payday Lending Practices

16 Jun 2026: Paige Estritori

In a significant ruling, the Federal Court has imposed a $7 million fine on Cigno Australia and BSF Solutions for operating an illegal payday lending scheme that contravened Australian credit laws. Each company has been ordered to pay $3 million, while their respective directors, Mark Swanepoel and Brenton Harrison, have been fined $500,000 each. - read more

ANZ Tops Major Banks in Business Lending Expansion for April 2026

16 Jun 2026: Paige Estritori

In April 2026, the Australia and New Zealand Banking Group (ANZ) achieved the highest monthly growth in business lending among the nation's major banks. According to the Australian Prudential Regulation Authority (APRA), ANZ's business lending portfolio increased by $1.9 billion, reaching a total of $152.9 billion, marking a 1.24% growth for the month. - read more

Australian SMEs Reduce Borrowing Amid Economic Uncertainty

16 Jun 2026: Paige Estritori

Recent data from non-bank lender Banjo Loans indicates a decline in borrowing activity among Australian small and medium-sized enterprises (SMEs) during the final quarter of 2025. The Banjo Barometer for Q2 FY26 reports a 5% decrease in SME loan applications, following a 14% spike in the previous quarter. - read more

Non-Bank Lenders Advocate for Inclusion in Economic Resilience Program

09 Jun 2026: Paige Estritori

Non-bank lenders are urging the Australian government to include them in the $1 billion Economic Resilience Program, emphasizing their crucial role in providing financing to small and medium-sized enterprises (SMEs). This program aims to bolster businesses affected by economic challenges, and non-bank lenders argue that their participation would enhance the program's effectiveness. - read more

Brokers Adapt Strategies Amid Shifting Commercial Finance Landscape

09 Jun 2026: Paige Estritori

As the commercial finance landscape in Australia undergoes significant changes, brokers are adapting their strategies to better serve small and medium-sized enterprises (SMEs). Rising costs, regulatory shifts, and evolving economic conditions are prompting brokers to refine their approaches to meet the diverse financing needs of businesses. - read more

RBA's Third Rate Hike in 2026: Implications for Australian Businesses

25 May 2026: Paige Estritori

The Reserve Bank of Australia (RBA) has raised the official cash rate by 0.25 percentage points to 4.35% on 5 May 2026, marking the third increase this year. This decision aims to address escalating inflationary pressures affecting the Australian economy. - read more

High-Risk SMEs Escalate Search for Financing Amid Stricter Lending Criteria

25 May 2026: Paige Estritori

Recent data indicates a notable trend among high-risk small businesses in Australia: an increase in 'credit shopping,' where these enterprises apply to multiple lenders in pursuit of financing. This behaviour has become more prevalent as overall business credit demand has softened, with a marginal decline of 0.4% in the first quarter of 2026. - read more

Click for more Finance News