By Ankur Banerjee
SINGAPORE (Reuters) -Global shares drifted on Friday as investors reflected on relatively strong earnings from tech bellwethers in a week that started with a market rout sparked by the emergence of a low-cost Chinese artificial intelligence model.
Fresh threats from U.S. President Donald Trump of tariffs on Mexico and Canada lifted the dollar and pushed gold prices to record high as traders brace for the Saturday deadline set by Trump to impose 25% tariffs.[FRX/] [GOL/]
Nasdaq futures rose 0.58% after Apple executives forecast relatively strong sales growth. European futures pointed to a muted open after Europe’s benchmark index closed at a record high the previous day.
The pan-European STOXX 600 is on course for an over 6% gain in January, its strongest monthly performance since November 2023.
Technology stocks across the globe stumbled badly on Monday as investors factored in implications from the low-cost Chinese AI model, with shares of high-profile tech names such as Nvidia <NVDA.O>, and Oracle <ORCL.O> getting pummelled.
But tech stocks have since recouped some of those losses, CEOs of Microsoft and Meta defended their massive spending, saying it was crucial to staying competitive in the new field.
Vasu Menon, managing director of investment strategy at OCBC, said the DeepSeek development may create some uncertainty and put some pressure on valuations of AI players in the short term, but it does not alter the medium to long term outlook.
“The need for increased AI infrastructure will continue and any new computing capacity should get absorbed by increased AI demand which could grow significantly in the coming years.
With markets in mainland China, Hong Kong and Taiwan still closed for the Lunar New Year, the return of South Korea grabbed the spotlight in Asia.
The benchmark KOSPI slid over 1%, with shares of Samsung Electronics, which projected limited first quarter earnings growth on Friday, down 3%, and SK Hynix, a key supplier to Nvidia, 9.5% lower.
That left the MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.2% but still on course for a 1% gain this month, snapping its three month losing streak.
TARIFF THREAT
Investors were also weighing central bank actions this week in which the Federal Reserve held rates steady on Wednesday, in line with expectations, while the European Central Bank cut interest rates on Thursday as expected.
“The (Fed) meeting reinforced our belief the Fed is content to sit on the sidelines, in no hurry to move until the future is clearer,” said Susan Hill, head of government liquidity at Federated Hermes.
“We still think the Fed will cut rates this year and have pencilled in a 25 basis-point cut by mid-2025 and another coming around autumn.”
Data on Thursday showed U.S. economic growth slowed in the fourth quarter, but remained robust enough for investors to expect the Fed to lower rates only gradually this year.
Investor focus will now switch to the December U.S. personal consumption expenditures (PCE) price index report, Fed’s favoured gauge of inflation, due later in the day.
Trump’s policies remain a risk for the Fed’s policy outlook, and Saturday is likely to see new tariffs slapped on Canada, Mexico and possibly China. The Mexican peso and Canadian dollar remained on guard ahead of the deadline.
In Japan, the yen was last at 154.58 per dollar, having already climbed more than 1% for the week thus far. It was set to gain 1.9% for the month, which would mark its best January performance in seven years.
Expectations of further rate increases from the BOJ this year has boosted the yen. Deputy Governor Ryozo Himino said on Thursday that the central bank will continue to raise rates if the economy and prices move in line with the bank’s forecasts.
In commodities, gold rose to $2,799.71 an ounce to hit record levels, and was on course for a 6.5% rise in January, its strongest monthly performance since March. [GOL/]
Brent crude futures was 0.4% higher at $77.21 a barrel. U.S. crude futures rose 0.8% to $73.31 a barrel. [O/R]
(Reporting by Ankur Banerjee in Singapore, Lawrence Delevingne in Boston and Amanda Cooper in London. Additional reporting by Anjana Anil in Bengaluru. Editing by Emelia Sithole-Matarise, Jane Merriman,Lisa Shumaker, Diane Craft and Gerry Doyle)
