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Equity markets see losses on DeepSeek news, currencies watching Trump tariff talk

richard evans

Good morning

 

Nvidia shares fell sharply yesterday, along with other tech firms, as the Chinese firm DeepSeek put a question mark over the valuations of AI-linked companies.  Nvidia shares  had traded as high as almost $149 Friday sank over 20%, hitting $117 at one stage before closing at $118.52.   The move dragged the Nasdaq some 3% lower, S&P 500 dropped around 1.5%. 

 

I have such limited expertise in the AI arena that it is really impossible for me to comment although in China things rarely happen without meticulous planning.  Have DeepSeek really managed to achieve the nigh on impossible on such limited funds or is there actually a lot more going on behind the scenes?  And the timing of the DeepSeek news, and the subsequent impact on the US equity markets, could be a message to Trump that he will not get things all his own way when it comes to trade and tariffs.  And regardless of how good the Chinese alternative is, there is a chance it would be banned for security reasons.  Therre is a long way to go with this story.

 

On the tariff front, the FT had reported that Trump may begin with tariffs of 2.5%, steadily increasing to 20% if no remedial action was taken.  Trump was later questioned on this and made it clear he wanted tariffs to be much larger than 2.5%.  He remains keen to impose tariffs on any sector or country that seems to be harming the US.

 

Despite the moves in equities, currencies were pretty rangebound.   GBPUSD traded up to 1.2525 while EURUSD hit 1.0530, both ended the London session off those highs but still at elevated levels (1.2475 and 1.0470) compared to recent lows.  GBPEUR had traded up near 1.1920 but by the close was back at 1.1885, again off the highs but still elevated. 

 

USDJPY traded down to 153.75 during that spell of USD weakness, the lowest level since mid-Dec but still well off the Dec lows that came in around 148.70.  GBPJPY found a little support again in the low 192’s, as it did a few times late last week, so far holding above there.

 

This morning we have seen a bit of USD buying, most likely as a result of Trump’s tariff comments, which brings GBPUSD down to 1.2440 as I type and EURUSD to 1.0430 which leaves GBPEUR higher at 1.1925.  The relative strength of GBP against EUR could be down to interest rate differentials, with ECB looking to cut this week but BoE far less clear with some warnings that we could see inflation start to tick up again, pushed up by higher food and energy prices.   USDJPY has taken advantage of the stronger dollar and is currently 155.70, with GBPJPY now 193.60.

 

I’m not sure what it is like where you are but the weather here has been pretty horrific, not major storm levels but a mix of wind, heavy rain and the occasional hail storm.  Doesn’t look like it’ll be getting much better any time soon.

 

Mark won’t be happy if I dpo’t mention the fact that Leeds are at the top of the Championship after drawing with Burnley last night, Burnley claiming their 20th clean sheet of the season so far and I’m toild they haven’t conceded in the league since 21st December, so perhaps no surprise it finished 0-0.  I reckon both teams will be happy with that.   . 

 

US durable goods likely to be the highlight today, perhaps overshadowed by any developments on the AI story.  Overnight we have Aussie inflation as well as the minutes from the last BoJ meeting, be interesting to see how discussions went for the rate rise and whether we learn anything about future rate moves.  For now I don’t think further rate rises are expected for a few months.

 

Have a great day

 

-  09.00 ECB bank lending survey

-  13.30 US durable goods orders

-  14.00 US house prices

-  14.30 ECBs Cipollone speaks

-  23.50 BoJ minutes

-  00.30 AUS CPI

 

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