Asian Markets Slow Down as China’s AI Stock Surge Cools Off, Bloomberg
Asian stocks lost steam after an initial surge fuelled by China’s AI sector, with investors growing cautious amid global trade tensions and geopolitical uncertainties.
Stocks Retreat After AI-Fueled Rally
Asian markets opened strong but later pared gains as China’s AI-driven stock surge slowed. The regional equity index climbed 0.3% in early trade, reaching its highest level since November, before slipping. Hong Kong’s stock market and the Hang Seng Tech Index also retreated as investors took profits after weeks of rapid growth.
The AI frenzy was sparked by DeepSeek’s breakthrough in artificial intelligence, which triggered a $1 trillion rally in Chinese stocks. However, the momentum faded as traders reassessed their positions. Goldman Sachs raised its MSCI China index target, citing optimism over China’s tech advancements, but some investors, including Michael Burry, had already scaled back investments in Chinese tech before DeepSeek’s rise.
Geopolitical Tensions Weigh on Sentiment
Investor sentiment remained shaky as trade tensions escalated between the US and European Union. Former President Donald Trump’s proposed tariffs led to threats of retaliation from Europe, raising fears of a fresh trade conflict. Meanwhile, US Vice President JD Vance criticized European allies over their stance on Ukraine at a security conference, adding to market concerns.
Europe’s governments are under pressure to increase military spending, which could cost major economies an additional $3.1 trillion over the next decade. This uncertainty dragged down German and French bond futures, while the euro remained rangebound. Barclays analysts suggested that hopes for a Russia-Ukraine ceasefire would have little positive impact on European currencies, given ongoing security risks.
China’s Business Talks Fuel Profit-Taking
A meeting between President Xi Jinping and major business leaders, including Alibaba’s Jack Ma, had initially driven enthusiasm in China’s stock market. However, some investors used the event as an opportunity to lock in profits.
“The market had high expectations for the meeting, but some traders saw it as a chance to cash out after weeks of gains,” said Shen Meng, a director at Chanson & Co. Union Bancaire Privee’s Vey-Sern Ling described the event as a “sell-the-news” moment, following a two-week rally in Chinese tech stocks.
Japan’s Economy Strengthens, Yen Gains
Japan’s economy expanded for the third straight quarter, driven by strong business investments and improved exports. The better-than-expected GDP data fuelled speculation of interest rate hikes from the Bank of Japan, pushing the yen higher against major global currencies.
Oil Prices Stabilize, Westpac Shares Drop
Oil prices steadied after multiple declines as increased supply from Iraq and Russia dampened the outlook. Meanwhile, Australia’s Westpac Banking Corp. saw its stock tumble 6.2% after reporting weaker-than-expected profit margins.
