Weak growth, ECB boost traders’ euro area rate cut confidence

LONDON, Jan 30 (Reuters) – Traders grew more confident on Thursday that the European Central Bank would deliver three more rate cuts this year, as weak growth data followed by the bank’s latest rate reduction highlighted the need for more easing.

The ECB cut rates by 25 basis points (bps) to 2.75%, as expected, and kept the door open to further policy easing, helping push two-year German bond yields to three-week lows around 2.18%.

The decision came hot on the heels of data showing the euro zone economy unexpectedly stagnated last quarter, falling short of expectations for a 0.1% expansion, as two straight years of contraction in Germany weighed on the bloc as a whole.

That added to the gloom as US President Donald Trump’s tariff threats cast a shadow over an already sluggish euro zone economy, though he has so far not imposed blanket tariffs as feared.

Traders became more confident that the ECB would deliver three more rate cuts this year, now expecting around 70 bps of cuts by year-end, meaning more than an 80% chance of three cuts.

Last Friday, markets priced around a 60% chance of three moves.

“The ECB meeting was a tad dovish, with the mention of headwinds to growth, or at least it was not hawkish,” said Barclays’ head of euro rates strategy Rohan Khanna, adding that Thursday’s growth data was also below the ECB’s expectations.

Euro zone bond yields were broadly lower. Germany’s two-year yield, sensitive to rate expectations, was set for its biggest daily fall since late November, down around 8 bps in late trade.

Ten-year Bund yields fell 6 bps to 2.52%, while Italy’s 10-year yields dropped to 3.58%, the lowest in a week.

The euro, which usually takes a hit from rising rate-cut bets, was 0.1% higher on the day as the dollar weakened on the back of weaker-than-expected US growth data.

Europe’s STOXX 600 equity index was up 0.8%, relatively unmoved by the growth data or the ECB. An index of euro zone bank stocks held near the highest since 2011 it rose to earlier.

Bleak outlook

With the bloc facing a bleak outlook, some analysts said the ECB would have to cut rates below the 2% that markets expect to see by year-end. A 2% deposit rate falls in line with estimates for the so-called neutral rate in the euro zone, which neither restricts nor boosts growth.

“We expect to see developments on the tariff front in coming weeks. This will be a critical driver of ECB policy going forward,” said Salman Ahmed, global head of macro and strategic asset allocation at Fidelity International, who expects the ECB to cut rates to 1.5% by year-end, as concerns around global trade tensions weigh.

“But what happens after that… we still have to see,” he said.

A further ECB cut is likely to go through in March without much resistance among policymakers before the debate between them on further easing becomes more heated, possibly implying an April pause, three of them told Reuters on Thursday.

Traders see an April move as a coin toss, assuming the ECB cuts rates in March.

The bank’s Thursday move also reinforced policy divergence between the euro zone and the United States, where the Federal Reserve held rates steady on Wednesday and said there was no rush to cut them again.

The closely-watched premium 10-year US Treasury yields pay over German peers, which signals the difference in economic outlook between the two regions, rose back above 200 bps.

It dropped below that level for the first time since November earlier this week as German bond yields have risen in January while Treasury yields fell.

(Reporting by Yoruk Bahceli, Samuel Indyk, Dhara Ranasinghe, and Stefano Rebaudo, writing by Yoruk Bahceli; Editing by Amanda Cooper, Dhara Ranasinghe and Alex Richardson)

Trump tariff grenade threatens market calm

Jan 31 (Reuters) – A look at the day ahead in Asian markets.

A tumultuous week rounds off with investors in Asia taking their cue from more US ‘Big Tech’ earnings, digesting Fed Chair Jerome Powell’s guidance from earlier in the week, but bracing for US tariff-related volatility.

The global macro backdrop is broadly supportive, after the European Central Bank‘s rate cut and indication of more to come, the Bank of Canada‘s cut earlier this week, and expectations the Bank of England will ease next week.

But just before the Wall Street close on Thursday President Donald Trump said the US could slap 25% tariffs on Mexico and Canada. Trump had said Saturday would be tariff decision day – could China be targeted too?

On the corporate front, Apple shares were under pressure in volatile after-hours trading on Thursday after the company announced its latest results. The direction they eventually take could give Asian markets a cue on Friday.

It’s been a mixed bag for the ‘Magnificent 7’ this week. Nvidia shares got hammered on Monday by the DeepSeek news, shares in Microsoft fell sharply on Thursday after the firm’s results, while shares in Tesla and Meta rose in the wake of their earnings releases.

Another plank of the US tech story took an Asian twist on Thursday after the Wall Street Journal reported that Japan’s Softbank is in talks to invest USD 40 billion in OpenAI, more than had previously been mooted.

Markets in China are closed on Friday for the Chinese New Year holidays, and markets in South Korea and Taiwan are closed too. Liquidity across Asia will be lighter than normal.

Japanese markets will be more active though. After the Bank of Japan last week raised rates to a 17-year high of 0.5% and upped its inflation forecast, domestic assets will be sensitive to the latest retail sales, industrial production, unemployment and Tokyo inflation data on Friday.

In general, the mood music across markets is pretty upbeat, especially bearing in mind how discordant it was after the Deepseek-fueled turmoil on Monday.

The S&P 500 is only down 0.5% on the week and the Nasdaq is off 1.3% – hardly disastrous moves given the nervousness on Monday that a much more severe correction was on the cards. Indeed, the equal-weighted Nasdaq is in the green.

The global picture is even brighter. The MSCI World index goes into Friday flat on the week and hovering around its all-time high, the MSCI Asia ex-Japan is also steady, while euro and UK stocks are roaring to record highs.

Monday’s turmoil and rebound is reminiscent of the yen volatility shock from last August – fears of a yen carry trade unwind slammed stock markets on Aug. 5, yet they recovered within days. Many haven’t looked back since.

Here are key developments that could provide more direction to markets on Friday:

– Japan retail sales, industrial production, Tokyo CPI

– Australia producer price inflation (Q4)

– Thailand trade (December)

(By Jamie McGeever
Editing by Deepa Babington)

Wall Street ends down; Fed holds rates steady

NEW YORK – US stocks ended lower on Wednesday, but off their lows of the day, with the Federal Reserve holding interest rates steady as expected and Fed Chair Jerome Powell offering soothing comments for investors.

Technology shares were the biggest drag on the S&P 500. Nvidia shares fell 4.1% and Microsoft finished 1.1% lower on Wednesday, two days after a tech selloff sparked by Chinese startup DeepSeek‘s launch of AI models it said were cost-effective and ran on less advanced chips compared to US-based OpenAI.

Stocks initially extended losses after the Fed statement, with the Nasdaq at one point down more than 1% in afternoon trading.

The US central bank dropped language saying inflation “has made progress” towards the Fed’s 2% inflation goal, noting only the pace of price increases “remains elevated.”

Its decision to hold the policy rate steady was widely anticipated following three consecutive rate cuts in 2024 that reduced the Fed’s benchmark rate by a full percentage point.

Indexes pared losses as Powell began to speak at a press conference following the release of the policy statement. He said, “we do not need to be in a hurry to adjust our policy stance” and monetary policy is “well positioned” for the challenges at hand.

“Powell does a great job of calming markets,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma, adding that “a strong economy gives the Fed plenty of wiggle room.”

The Dow Jones Industrial Average fell 136.83 points, or 0.31%, to 44,713.52, the S&P 500 lost 28.39 points, or 0.47%, to 6,039.31 and the Nasdaq Composite lost 101.26 points, or 0.51%, to 19,632.32.

“The Fed didn’t hit the markets with any surprises,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Powell also said it is too soon to say what President Donald Trump’s policies will do and the central bank will take its time assessing what the new government policy regime means.

Investors have been worried about Trump’s proposed tariffs, which could exacerbate inflationary pressures and slow the pace of rate cuts.

The Fed gave little insight into when further reductions in borrowing costs may take place.

Traders are pricing in around 44 basis points of cuts by year-end, down from around 48 basis points before the Fed statement. That reflects falling confidence that the US central bank will make two 25 basis point rate reductions this year.

The December reading of the personal consumption expenditures price index, a crucial metric in assessing the inflation trajectory, is due on Friday.

After the closing bell, Microsoft reported slower-than-expected growth in its crucial Azure cloud business despite beating estimates for overall quarterly revenue. Its shares were down 1.5% in after-hours trading.

During the regular session, shares of cloud services company F5 jumped 11.4% after it forecast second-quarter revenue above estimates and reported a first-quarter revenue beat.

Declining issues outnumbered advancers by a 1.6-to-1 ratio on the NYSE. There were 151 new highs and 68 new lows on the NYSE.

On the Nasdaq, 1,829 stocks rose and 2,548 fell as declining issues outnumbered advancers by a 1.39-to-1 ratio.

Volume on US exchanges was 13.00 billion shares, compared with the 15.5 billion average for the full session over the last 20 trading days.

(Reporting by Caroline Valetkevitch; additional reporting by Shashwat Chauhan and Sukriti Gupta in Bengaluru; Editing by Shounak Dasgupta, Arun Koyyur, Pooja Desai and Aurora Ellis)

Oil prices settle down as US stockpile grows, tariffs still in focus

Oil prices fell on Wednesday, with the US benchmark settling at its lowest year to date, after domestic crude stockpiles in the world’s top petroleum producer and consumer rose more than expected last week.

Brent crude futures settled down 91 cents, or 1.2%, at USD 76.58 a barrel. US crude futures fell USD 1.15, or 1.6%, to USD 72.62, their lowest settlement price so far this year.

Crude oil stockpiles in the US rose by 3.46 million barrels last week as refiner intake slumped for a third consecutive week, data from the Energy Information Administration showed.

Analysts polled by Reuters had expected a 3.19-million-barrel increase.

The White House on Tuesday reaffirmed President Donald Trump’s plan to impose 25% tariffs on imports from Canada and Mexico from Feb. 1. Near-term oil trade should remain choppy as investors digest the tariff threats, sanctions on Russian energy flows, and economic growth concerns in top consuming nations, UBS analyst Giovanni Staunovo wrote to clients on Wednesday.

“Considering the many prevailing uncertainties, we think a prudent approach is still warranted,” Staunovo wrote. “While we expect prices to stay supported at current levels, news flow related to Trump is likely to drive volatility in the near term.”

The US Federal Reserve held interest rates steady on Wednesday. The Fed gave little insight on when it plans to lower borrowing costs, which could boost economic activity and oil demand.

Traders are also looking ahead to an OPEC+ ministerial meeting scheduled for Feb. 3, with the group’s plan to increase supply from April in focus.

Trump last week called on OPEC+ to lower oil prices. The group has yet to respond, but delegates said policy changes are unlikely at the February meeting.

Supply concerns have eased after Libya’s National Oil Corp said on Tuesday that export activity was running normally after it held talks with protesters who had demanded a halt to loadings at one of the country’s main oil ports.

“Libyan supplies will remain a risk as the country remains engaged in a civil war, but for now, the risk has been mitigated temporarily,” StoneX analyst Alex Hodes said.

(Reporting by Shariq Khan
Additional reporting by Arunima Kumar, Naveen Thukral and Yuka Obayashi
Editing by Jason Neely, David Goodman, Christina Fincher, Nia Williams, Leslie Adler and David Gregorio)

ECB to cut interest rates, keep door open to further easing

FRANKFURT – The European Central Bank is all but certain to cut interest rates on Thursday and is likely to keep open the door to further policy easing as concerns over lackluster economic growth supersede worries about persistent inflation.

The ECB lowered borrowing costs four times last year and up to four moves are anticipated in 2025, driven by arguments that the biggest inflation surge in generations is nearly defeated while the economy demands relief.

With the euro zone suffering through an industrial recession and weak consumption, the case for a cut is so clear that none of the ECB’s 26 policymakers have publicly pushed back.

That could mean a unanimous vote for a 25 basis point cut to take the deposit rate to 2.75%, its lowest since early 2023, even after the U.S. Federal Reserve, the world’s largest central bank, paused its own easing cycle on Wednesday.

While ECB President Christine Lagarde is unlikely to commit explicitly to more cuts, she is likely to argue that the direction of policy remains clear and that the risk of a trade war with the United States could sap weak growth even more.

“Inflation is approaching the target in a more sustainable manner, the economic outlook remains challenging, while rates clearly remain in restrictive territory,” Nordea economist Jan von Gerich said. “The process of gradual normalization thus remains incomplete.”

Inflation, which rose to 2.4% in December, could still take a few months to ease back to the ECB’s 2% goal but there is little to challenge the narrative that all is on track.

Wage growth is easing, the labour market is softening, oil prices have come off early-year highs and the dollar’s relentless firming seems to have stopped for now.

A few voices are still likely to argue that pressure on services costs remains too high for comfort but that is more an argument for gradualism than for a pause.

Complications

But with a debate already starting on where the ECB’s rate cuts should end, consensus may be more difficult to maintain with each future cut.

New U.S. President Donald Trump’s policies could also make the environment more volatile. His threatened trade tariffs would weigh on growth but any retaliatory measures by the European Union would risk pushing up inflation.

Trump last week demanded that the Fed cut interest rates but the bank resisted on Wednesday, arguing that inflation was still elevated and it was not in a hurry to cut borrowing costs, a signal taken by markets to suggest that a longer pause may be ahead.

Any escalation of the war of words between them might rattle financial markets.

At 2.75% the ECB’s deposit rate would be approaching the 1.75% to 2.50% range considered “neutral”, neither fueling nor dampening economic activity. But any Trump-induced volatility could intensify calls for the ECB to go below this rate and start stimulating growth.

“There is a strong case to take official rates to the lower end of the range of estimates for neutral by mid-2025, with risks tilted towards the potential impact of trade frictions leading to considering even slightly lower rates,” economist Antonio Villarroya at Santander CIB said.

A trade war would shake already weak confidence.

Consumers are saving up cash, industry is shrinking, governments have modest buffers to spend and exports – long the driving force behind growth – are barely expanding.

“In an environment characterized by weak domestic demand, elevated uncertainty, and still-restrictive monetary policy, firms are likely to continue holding back on investment, which we expect to contract further in the first half of 2025,” Barclays economist Mariano Cena said.

But inflation is still above the ECB’s target and poor productivity growth along with labour shortages could keep up price pressures, likely limiting just how far the bank can go.

Foreshadowing the upcoming debate on pausing, board member Isabel Schnabel, an outspoken policy hawk, said the ECB was getting closer and closer to the point where it must debate how much more it can cut.

(Editing by Catherine Evans)

US recap: Dollar mixed as risk aversion slams tech

The dollar index fell with Treasury yields on Monday as concerns about China challenging US AI dominance weighed on technology stocks.

The yen and Swiss franc held earlier gains as havens to the tech market sell-off.

Chinese startup DeepSeek, the company threatening US rivals with a low-cost AI model, said it will temporarily limit registrations due to a cyberattack.

Risk aversion and a strong 5-year auction sent US Treasury yields lower though US new homes sales exceeded expectations and the Dallas Fed manufacturing index improved in January.

Focus midweek is on tech earnings, Q4 GDP, and the outcome of Wednesday’s Fed policy meeting. The US central bank is seen holding it policy rate steady at 4.25%-4.5%.

EUR/USD pared gains after rising above its 20-day upper Bollinger to a 1-1/2-month high of 1.0535. The European Central Bank is expected to lower its policy rate by 25 basis points on Thursday, potentially hampering bullish momentum. A rise above 1.06 is considered bullish with nearby support seen at 1.0450.

GBP/USD was little changed during the session. A dearth of UK data this week will likely see the pair move according to month-end flows and US risks. British Prime Minister Keir Starmer and US President Donald Trump agreed to meet soon after a cordial call on Sunday.

USD/JPY steadied above its daily cloud top at 153.88 as downward momentum stalled and a spike in yen volatility abated. The pair needs to eclipse its 55-DMA at 154.97 to neutralize bears. Japan will eye services PPI on Tuesday.

Treasury yields fell 7 to 10 basis points. The 2s-10s curve was down about 1 basis point to +33.7bp.

The S&P 500 slid 1.8% fueled by falling tech shares.

Oil fell about 2.3% pressured by demand worries amid sliding equity prices.

Gold fell 1.2% while copper slid 2.5% as weak China manufacturing data sparked demand worries ahead of the Lunar New Year holiday.

Heading toward the close: EUR/USD -0.08%, USD/JPY -1.04%, GBP/USD +0.05%, AUD/USD -0.49%, DXY -0.04%, EUR/JPY -1.07%, GBP/JPY -1.00%, AUD/JPY -1.48%.

(Editing by Burton Frierson; Reporting by Robert Fullem)

Oil hits 2-week low as China’s DeepSeek AI spurs demand fears

NEW YORK – Oil prices fell about 2% to a two-week low on Monday as news of surging interest in Chinese startup DeepSeek’s low-cost artificial intelligence (AI) model prompted concerns over energy demand to power data centers.

Before the news of DeepSeek broke, oil was already trading lower on weak economic data from China and worries that US President Donald Trump’s proposed tariffs could further pressure economic growth and energy demand.

Brent futures fell USD 1.42, or 1.8%, to settle at USD 77.08 a barrel, while US West Texas Intermediate (WTI) crude ended USD 1.49, or 2.0%, lower at USD 73.17.

Brent closed at its lowest since Jan. 9 and WTI at its lowest since Jan. 2.

Chinese startup DeepSeek’s AI Assistant overtook US rival ChatGPT to become the top-rated free application available on Apple’s App Store in the US That fed doubts among investors who have poured money into US energy firms hoping AI would drive demand for energy to power data centers.

“The DeepSeek model is (reported to be) more energy and capital efficient, which calls into question the significant electric demand projections for the US,” analysts at Jefferies, an investment bank, said in a report, noting AI represents about 75% of overall US demand forecasts through 2030-2035 in most projections.

“It is still early to draw conclusions on the outlook in the immediate aftermath of DeepSeek, but the 20%(-plus) YTD (year-to-date) rally in power companies looks exposed,” Jefferies said.

In other news from China, the world’s second biggest economy behind the US, manufacturing data was weaker than expected, adding fresh concerns over energy demand.

“The weak readings highlight the need for more policy efforts to stabilize economic growth,” analysts at Citibank said in a report.

TRUMP ON TARIFFS AND OPEC

Analysts said oil prices have been depressed in recent days following President Trump’s call last week for the Organization of the Petroleum Exporting Countries to reduce oil prices.

“President Trump continued to put the pressure on OPEC … calling on the producer group to lower prices to help end the Russian war in Ukraine,” Bob Yawger, director of energy futures at Mizuho, said in a report.

OPEC and its allies including Russia in the OPEC+ group have yet to react to Trump’s call, with OPEC+ delegates pointing to an existing plan to start raising oil output from April.

Trump’s tariff threats have also mostly pressured oil prices, feeding worries that a trade war could hurt global economic growth and oil demand.

Over the weekend, the US threatened and then swiftly reversed plans to impose sanctions and tariffs on Colombia after the South American nation agreed to accept deported migrants from the US

Colombia last year sent about 41% of its seaborne crude exports to the US, data from analytics firm Kpler shows. The agreement will allow that oil to continue to flow, another factor pressuring crude prices on Monday.

(Reporting by Scott DiSavino, Anna Hirtenstein, and Robert Harvey; Additional reporting by Florence Tan; Editing by Marguerita Choy and David Gregorio)

AI-themed ETFs plunge in wake of DeepSeek news

Prices of exchange-traded funds with outsize exposure to Nvidia plunged on Monday in reaction to news that a Chinese startup has launched a powerful new artificial intelligence model.

Technology market insiders like venture capitalist Marc Andreessen have labeled the emergence of year-old DeepSeek’s model a “Sputnik moment” for US AI companies, most of whose share prices slid on news that downloads of DeepSeek already have overtaken those of US rival ChatGPT on Apple’s online app store.

While Nvidia’s share price traded about 17.3% lower by midafternoon on Monday, prices of exchange-traded funds that offer leveraged exposure to the chipmaker plunged still further.

The four ETFs that offer daily returns of double the gain in Nvidia were hit with the biggest decline, with the GraniteShares 2x Long NVDA Daily ETF nosediving 34.5%. Its leveraged inverse counterpart, which offers investors a gain of double any losses in Nvidia’s stock, soared nearly 34%.

“These movements were to be expected, given what we saw happen with Nvidia,” said Will Rhind, founder and CEO of GraniteShares. “We won’t begin to get a sense of how much we’re seeing in outflows or inflows until after the market is closed, though.”

Other leveraged ETFs with large Nvidia exposure made equally dramatic moves. The ProShares Ultra Semiconductors ETF, which targets a return double that of the Dow Jones US Semiconductors Index and has more than 40% of its assets in Nvidia, tumbled 24.43% by midday on Monday. Those ETF providers could not immediately be reached for comment.

“Volatility is what the gamblers in single-stock ETFs are looking for,” said Bryan Armour, ETF analyst at Morningstar. “Those that have a bad experience now might shy away in future, but I’m sure they’ll be replaced by others.”

The leveraged ETFs, which carry relatively high fees of close to 1% compared with about 0.4% for a typical actively managed ETF, are the domain of retail traders and speculators, Armour added.

But other ETFs were caught up in the selling, including many owned by institutions and retail investors with a longer investment time horizon.

For instance, the Vanguard Information Technology Index Fund traded down 5.25% by midafternoon on Monday. Nvidia is the fund’s second-largest holding, at nearly 15% of the portfolio.

The VistaShares Artificial Intelligence Supercycle ETF lost about 10% by midafternoon. It has a smaller exposure to Nvidia – only 3% – but owns a wide variety of other AI stocks.

“Innovation and competition emerging in something as early-stage and dynamic as AI is not that surprising,” said Adam Patti, co-founder and CEO of VistaShares. “The market will have to sort itself out over the months and years, as to what works and what will prevail.”

The rapid growth of AI enthusiasm sent assets in the VistaShares ETF – launched only seven weeks ago – to more than USD 3 million by Friday, the firm said. The 2x GraniteShares Nvidia ETF – the largest of the leveraged funds – had USD 5.3 billion in assets as of Friday, according to data from VettaFi, accounting for about half of GraniteShares’ total assets.

“This has been a little painful, but interesting,” said Evan Feagans, who manages the USD 74 million TCW Artificial Intelligence ETF, which has an 8.5% weighting in Nvidia.

“It has been a ‘shoot first, ask questions later’ kind of response to the DeepSeek news, but I think moves like this create opportunities. I’d expect to hear some of the biggest investors in AI reiterate their AI capital spending outlooks after they report earnings numbers.”

The selloff follows a week in which investors “aggressively” unloaded holdings in leveraged technology ETFs, said research firm EPFR in its weekly analysis. The firm said these ETFs recorded the second-largest weekly outflow on record, of USD 1.8 billion, with investors selling USD 400 million in leveraged Nvidia exposure alone.

Data for any outflows from these and other AI-themed ETFs on Monday is not available until Tuesday.

(Reporting by Suzanne McGee in Providence, Rhode Island; Editing by Megan Davies and Matthew Lewis)

Gold retreats as investors liquidate positions in equities sell-off

Gold prices declined more than 1% on Monday, retreating from near-record highs seen in the last session, as investors liquidated bullion positions, along with a broader market sell-off sparked by rising interest in Chinese AI start-up DeepSeek.

Spot gold was down 1.3% at USD 2,736.75 per ounce as of 01:49 p.m. ET (1849 GMT). Prices had risen to near-record high levels on Friday. US gold futures GCcv1 settled 1.5% lower at USD 2,738.40 per ounce.

The sharp declines in global equity markets have driven risk-averse moves across other asset classes, with US Treasury yields dropping to three-week lows and the dollar index hitting its lowest levels since Dec. 18.

“This (sell-off) is very much driven by the broad equity market rather than just the normal interest rates or currency. We’re seeing a bit of a liquidity crunch,” said Bart Melek, head of commodity strategies at TD Securities.

“Some people need to maybe create liquidity in the market and maybe some of the stocks that they were leveraged on or had margin against had a big move, so I think it’s a liquidity issue and gold is being sold along with other risk assets.”

The sell-off came ahead of the US Federal Reserve’s first policy meeting of the year, where policymakers are largely expected to keep interest rates steady on Wednesday, according to the CME FedWatch tool.

However, investor focus will be on any cues regarding future policy decisions as US President Donald Trump begins his second term, with his tariff policies likely to fuel inflation.

“Gold remains fairly well bid. Safe haven demand is going to continue to support… We will ultimately break out to new all-time highs as there’s ongoing uncertainty about the Trump administration’s policy agenda,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.

Spot silver fell 1.7% to USD 30.10 per ounce, after logging a 0.9% increase last week.

Palladium dipped 2.9% to USD 959 per ounce and platinum fell 0.3% to USD 945.80 per ounce.

(Reporting by Anmol Choubey and Anjana Anil in Bengaluru, additional reporting by Swati Verma; Editing by Shreya Biswas)

China’s AI neophyte rocks Wall St ahead of Fed, mega-tech earnings

The US tech juggernaut suffered a sharp setback on Monday, setting global markets up for a volatile ride this week, with mega-cap earnings on deck, the Fed’s meeting, and lingering uncertainty over US President Donald Trump’s trade policies.

US stocks tumbled on Monday, led by tech shares, as the growing buzz around Chinese startup DeepSeek’s low-cost AI model sparked concerns about the sector’s high valuations.

Selling on Asian exchanges outside China spilled over into US stock futures. The S&P 500 dropped about 1.5% after hitting an all-time high last week and the Nasdaq swooned more than 3%, while Nvidia, whose chips are the top choice for powering AI applications, dropped about 17%.

Investors meanwhile flocked to US Treasuries in a flight to safety, pushing benchmark 10-year yields down 10 basis points to 4.53%. The dollar index fell 0.1% to its lowest since Dec. 18.

Foreign competition to the US dominance in artificial intelligence has sparked broader concerns over valuations in US equities, where Big Tech shares have led stocks higher over the past couple of years.

This means all eyes will be on a wave of earnings reports this week, with megacap tech giants Tesla, Meta, Microsoft, and Apple set to take center stage. Investors will be hunting for clues on when the hefty bets on artificial intelligence will begin to pay off in a meaningful way.

Meanwhile US trade policies remain a key market theme.

China, Mexico, and Canada remain on edge as Trump last week marked Feb. 1 as the date for imposing additional tariffs on the major US trading partners.

And while so far he has refrained from implementing broad trade levies, on Sunday Trump threatened Colombia with tariffs and sanctions to punish it for refusing to accept military flights carrying deportees. Colombia later said it would accept the military aircraft and the US sanctions threat was put on hold, but investors got a taste of how Trump’s trade decisions could surprise markets.

Later this week, the Fed’s first meeting of 2025 will be a major focus for investors trying to decipher how Trump’s economic policies will impact the US central bank’s views on growth and inflation.

US policymakers are expected to leave interest rates unchanged at their rate-setting meeting, which starts on Tuesday and ends on Wednesday, but Trump may complicate the Fed’s job going forward, after he said last week he wants the Fed to lower borrowing costs.

The European Central Bank meanwhile will meet on Thursday for the first time since Trump returned to office. It is largely expected to cut the key deposit rate by another 25 basis points, but investors will look for hints on the path ahead as the threat of US tariffs clouds the European economic outlook.

The economic data calendar in Asia is light on Tuesday, and many bourses have extended holidays this week for the Lunar New Year. Markets in mainland China are shut from Tuesday and do not reopen until Feb. 5, while Singapore’s financial markets will be closed for a half day on Tuesday and closed for all of Wednesday and Thursday, for national holidays.

Here are key developments that could provide more direction to markets on Tuesday:

– Japan service PPI (Dec)

– Australia Business Confidence Index

– US durable goods (Dec)

– US 7-year Treasury auction

(Reporting by Davide Barbuscia; Editing by Alden Bentley and Deepa Babington)

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