Global financial markets faced mixed reactions on Monday as investors assessed the implications of significant geopolitical and technological developments. U.S. stock futures and Asian shares outside of China took a hit, while the dollar strengthened amid tensions between the United States and Colombia, which narrowly avoided escalating trade sanctions.
The launch of Chinese startup DeepSeek’s free, open-source AI model, designed to compete with OpenAI’s ChatGPT, rattled investors. The move is seen as a bold challenge to U.S. tech dominance, raising concerns about the valuation of leading tech companies.
As of 06:34 GMT, Nasdaq Composite futures plunged by 2.3%, and S&P 500 futures fell by 1.3%. The sentiment carried over into Asian markets: Japan’s Nikkei 225 reversed an initial gain, dropping 0.9% and New Zealand’s NZX 50 slipped 0.2%, while Singapore’s Straits Times Index eased 0.1%.
In contrast, Chinese markets fared better despite surprising data showing a contraction in manufacturing: Hong Kong’s Hang Seng Index rallied by 1% and Mainland blue-chip stocks (CSI 300) posted a modest 0.1% gain.
European futures followed the downward trend, with Pan-European STOXX 50 futures losing 0.9%. Analysts, including Yeap Jun Rong from IG, highlighted the disruptive potential of DeepSeek’s entry into the AI market.
“DeepSeek’s emergence underscores China’s ability to push forward in the AI race despite U.S. restrictions,” noted Yeap. “This has sparked concerns over U.S. tech dominance and placed lofty tech valuations under scrutiny.”
In the currency market, the U.S. dollar strengthened against major counterparts: It gained 0.4% against the Chinese yuan in offshore trading and both the Australian and New Zealand dollars dropped 0.4%, reflecting their close ties to China.
Other notable currency moves included: The Mexican peso, which fell 0.7%, the Canadian dollar, easing 0.2%, the euro, slipping 0.2% to $1.0461 and Sterling, down 0.1% at $1.2457.
Meanwhile, the yen remained steady at 156.13 per dollar, and the Colombian peso held its ground after rallying 3.4% over the past three sessions.
The dollar’s momentum was supported by geopolitical developments as U.S.-Colombia trade tensions eased. President Donald Trump had threatened sanctions and retaliatory levies after Colombia initially refused military aircraft carrying deported migrants. A last-minute agreement prevented further escalation, allowing markets to refocus on broader economic concerns.
The markets are set for a volatile week as investors digest the implications of DeepSeek’s ambitious AI launch and monitor global geopolitical developments. The heightened focus on tech valuations and geopolitical risks may drive cautious sentiment, leaving markets on edge as the week progresses.