Written by Kevin Buckland
TOKYO (Reuters) – U.S. stock futures and Asian shares outside China fell on Monday as investors weighed the implications of Chinese startup DeepSeek's launch of a free, open-source artificial intelligence model to rival OpenAI's ChatGPT.
Meanwhile, the dollar rose after US President Donald Trump imposed retaliatory tariffs and sanctions on Colombia over the rejection of military planes carrying deported migrants.
US futures fell 1.8 percent by 0158 GMT and were down 0.9 percent.
It fell 0.3%, reversing its initial advance. New Zealand's stock index fell 0.6%, and Singapore's Straits Times Index lost 0.2%.
Meanwhile, Hong Kong's index rose 0.9% and the mainland's blue-chip stocks rose 0.2%, even after data showed a surprise contraction in the manufacturing sector this month.
DeepSeek “has raised the specter of disruption in the technology landscape, as its emergence suggests that China could continue to make great strides in the AI race despite US restrictions,” IG strategist Yip Jun Rong wrote in a note.
He added that this “appears to raise some concerns about US technology dominance,” putting “the high valuation of technology companies under the microscope once again.”
In currencies, the dollar jumped 0.3% against the greenback in offshore trading, rose 0.4% against the New Zealand dollar and 0.5% against the New Zealand dollar, with counter currencies tending to act as more liquid proxies for the Chinese currency due to close trade relations.
The Mexican peso fell 1 percent and the Canadian dollar fell 0.3 percent, despite the Colombian peso rising 1.2 percent.
Dollar strength is fleeting
China, Mexico and Canada are facing a nervous wait, with Trump last week allocating February 1 to impose additional tariffs on major US trading partners.
However, Naka Matsuzawa, a strategist at Nomura Bank, expects the dollar's strength due to tariff concerns to be fleeting.
“As a general trend, Trump is taking a more realistic and less aggressive stance on tariffs,” Matsuzawa said.
“The bottom line: Trump doesn’t want big tariffs because he’s worried about inflation,” he said. “The dollar will be weaker overall.”
Last week, Trump calmed market fears by saying he wanted to avoid tariffs on China, and said he might reach a trade agreement.
Volatility across asset classes begins a crucial week for markets as the Federal Reserve and European Central Bank – among others – will set monetary policy.
Meanwhile, many stock exchanges have extended holidays this week on the occasion of the Lunar New Year. Among them, South Korea is closed on Monday and Tuesday, while Taiwan is closed all week. Mainland China will be absent from Tuesday until Wednesday of next week. Australia is closed on Monday for Australia Day.
Meanwhile, prices fell after Trump on Friday repeated his call for OPEC to lower oil prices.
Futures fell 1.2% to $77.60 per barrel, while US West Texas Intermediate crude lost 1.2% to $73.78 per barrel.
Gold fell 0.6 percent to $2,755.85 an ounce.
The leading cryptocurrency Bitcoin fell 3.5 percent to $101,415.12.
