- US stocks were broadly hit on Monday with steep losses in AI and tech names leading the downside in which NVDA closed down around 17%. The weakness was observed with questions now hanging over the AI dominance in the US after China's DeepSeek (OpenAI rival) saw impressive performances at a fraction of the costs, bringing into question the need for extortionate CapEx from tech companies expanding their AI portfolios, while the sell-off sparked a flight to quality with T-notes higher across the curve and outperformance seen in haven currencies Yen and Swissy.
- USD was pressured and the DXY briefly dipped beneath the 107.00 level amid sharp losses in US stocks which spurred haven strength ex-dollar with China's DeepSeek challenging US AI dominance for a fraction of the cost, although the DXY then recouped some of the losses as markets await this week's risk events, while Barclays month-end model indicated "moderate USD selling against most majors" and that the signal for Cable is "borderline strong".
- Looking ahead, highlights include Japanese Services PPI & BoJ Core CPI, Australian NAB Business Confidence, Supply from Australia, Holiday Closures in China, South Korea, Taiwan, Indonesia & Vietnam, while markets in Hong Kong & Malaysia will close early.
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LOOKING AHEAD
- Highlights include Japanese Services PPI & BoJ Core CPI, Australian NAB Business Confidence, Supply from Australia, Holiday Closures in China, South Korea, Taiwan, Indonesia & Vietnam, while markets in Hong Kong & Malaysia will close early.
- Click for the Newsquawk Week Ahead.
US TRADE
- US stocks were broadly hit on Monday with steep losses in AI and tech names leading the downside in which NVDA closed down around 17%. The weakness was observed with questions now hanging over the AI dominance in the US after China's DeepSeek (OpenAI rival) saw impressive performances at a fraction of the costs, bringing into question the need for extortionate CapEx from tech companies expanding their AI portfolios, while the sell-off sparked a flight to quality with T-notes higher across the curve and outperformance seen in haven currencies Yen and Swissy.
- SPX -1.46% at 6,012, NDX -2.97% at 21,127, DJIA +0.65% at 44,714, RUT -1.03% at 2,284.
- Click here for a detailed summary.
NOTABLE HEADLINES
- US President Trump to sign an order to begin the process of creating the next generation of missile defence, while the order will call for the creation of an 'Iron Dome' for the US.
- US President Trump's AI czar David Sacks posted on X that DeepSeek R1 shows that the AI race will be very competitive and that President Trump was right to rescind the Biden Executive Order that hamstrung American AI companies without asking whether China would do the same.
- Canada’s Foreign Minister said she will be talking to British, EU and Mexican counterparts soon in a bid to fend off US tariffs.
DATA RECAP
- US New Home Sales-Units (Dec) 0.698M vs. Exp. 0.675M (Prev. 0.664M, Rev. 0.674M)
- US New Home Sales Change MM (Dec) 3.6% (Prev. 5.9%, Rev. 9.6%)
FX
- USD was pressured and the DXY briefly dipped beneath the 107.00 level amid sharp losses in US stocks which spurred haven strength ex-dollar with China's DeepSeek challenging US AI dominance for a fraction of the cost, although the DXY then recouped some of the losses as markets await this week's risk events, while Barclays month-end model indicated "moderate USD selling against most majors" and that the signal for Cable is "borderline strong".
- EUR was ultimately flat on the day after failing to sustain a brief return to above the 1.0500 level against the dollar.
- GBP eked mild gains and momentarily reclaimed the 1.2500 status but with upside capped in light pertinent newsflow.
- JPY strengthened as the risk-off mood spurred a haven bid into the Japanese currency which dragged USD/JPY briefly beneath the 154.00 handle.
- SNB Chairman Schlegel said the SNB does not like negative interest rates but they cannot be excluded and they have worked in the past. Schlegel had also commented that Swiss inflation is to be relatively low this year and monthly inflation data may dip below zero.
FIXED INCOME
- T-notes rallied in a flight to quality as DeepSeek rattled US tech and weighed on overall risk sentiment.
COMMODITIES
- Oil prices began the week on the back foot amid the broader risk aversion in the wake of Chinese start-up DeepSeek challenging US AI tech dominance.
- Oil traders expect OPEC+ to stick with its current supply policy at a review meeting next week, resisting pressure from US President Trump to open the taps and bring down crude prices, according to a survey by Bloomberg.
- Russian refineries have raised oil processing by 2% following new US sanctions, according to Reuters citing industry sources.
- Oil exports from Russia’s UST-Luga terminal are to fall to a four-year low of 1.5mln tons in January.
- Russia's Ryazan oil refinery halted operations following last week's drone attacks, according to Reuters sources.
- Indian Oil Corp bought another 6mln barrels of sweet crude via a tender for April delivery, as the country's top refiner seeks to replace Russian oil after US sanctions disrupted supply, according to Reuters citing sources.
- EU Commission said it will continue talks with Ukraine on Natgas supplies to Europe and will include Hungary and Slovakia. It was later reported that the Slovakian Foreign Minister said they welcome the European Commission statement on gas supplies through Ukraine and see Ukraine's willingness to discuss transit of non-Russian gas as a return to a solution they have proposed, such as Azeri gas.
GEOPOLITICAL
MIDDLE EAST
- Israeli PM Netanyahu is to travel to Washington next week for a meeting at the White House with US President Trump, according to Axios.
- IDF spokesman said the army is redeploying in various locations in the south of Lebanon, according to Al Jazeera.
- Iran launched AI-guided missiles during military manoeuvres in Gulf waters, according to Sky News Arabia citing Iranian press.
- EU Foreign Ministers agreed on a road map to ease sanctions on Syria.
- White House Envoy Steve Witkoff will travel on Tuesday to Saudi Arabia to meet Crown Prince Mohammed Bin Salman.
RUSSIA-UKRAINE
- Russia's Kremlin said there is still no signal from the US side about a Trump-Putin meeting.
- EU Foreign Ministers have agreed to roll over Russian sanctions, according to Reuters citing diplomats.
OTHER
- India’s Foreign Minister said India and China have agreed in principle to resume dialogue on a step-by-step basis and agreed in principle to resume direct air services between the two nations.
ASIA-PAC
NOTABLE HEADLINES
- Chinese President Xi said they will be preventing and resolving risks in key areas and external shocks to promote a sustained economic recovery and improvement in 2025, according to Xinhua.
- DeepSeek said service was degraded due to a "large-scale malicious attack" and it was temporarily limiting registrations.
- White House said US President Trump emphasised to Indian PM Modi the importance of India increasing its procurement of American-made security equipment and emphasised the importance of moving towards a fair bilateral trading relationship.
EU/UK
DATA RECAP
- German Ifo Expectations New (Jan) 84.2 vs. Exp. 84.2 (Prev. 84.4)
- German Ifo Current Conditions New (Jan) 86.1 vs. Exp. 85.4 (Prev. 85.1)
- German Ifo Business Climate New (Jan) 85.1 vs. Exp. 84.7 (Prev. 84.7)
