Morning Bid: Monitoring greenback, DeepSeek and China’s PMIs

By Jamie McGeever

(Reuters) – A have a look at the day forward in Asian markets. 

A giant week for world markets kicks off in Asia on Monday with buyers nonetheless navigating the blizzard of headlines round U.S. President Donald Trump’s probably financial agenda, whereas attempting to gauge whether or not the “U.S. exceptionalism” narrative could also be shedding its luster.

The greenback fell 1.8% final week, its worst week since November 2023. If the buck is consolidating, it should not actually be a shock – it hit a two-year excessive earlier this month and hedge fund web ‘lengthy’ place was the largest in 9 years.

The greenback and U.S. shares have been intently correlated, lifted by the large wave of worldwide capital inflows as buyers wager closely on the American AI, tech, progress and returns growth.

But when the greenback’s slide is an indication that the “U.S. exceptionalism” flame is beginning to flicker, is Wall Avenue primed for a cooling off interval too?

The S&P 500 hit a brand new excessive final week and the Nasdaq got here shut. Index ranges are traditionally excessive, valuations are stretched, and massive occasion threat looms this week within the form of the Fed’s coverage assembly and ‘Massive Tech’ earnings.

Scrutiny on U.S. tech is intensifying as ripples from a Chinese language AI startup referred to as DeepSeek unfold. DeepSeek not too long ago launched a free, open-source AI mannequin it claims is a minimum of the equal of extra established fashions like ChatGPT on many ranges, however constructed at a fraction of the associated fee.

It is early days but when this shines a vital mild on the large sums being spent on AI by U.S. tech corporations, Wall Avenue may wobble.

The Asian calendar on Monday is dominated by China’s ‘official’ manufacturing and repair sector buying managers index reviews for January.

A Reuters ballot suggests the manufacturing PMI shall be unchanged from the earlier month at 50.1. On the one hand, that might characterize the fourth straight month of growth within the sector. It could additionally point out virtually no progress in any respect for the second month in a row.

Information on Friday confirmed Chinese language state-owned corporations’ income final yr just about evaporated, rising solely 0.4% on the earlier yr. Wider industrial sector income figures are due this week, maybe as early as Monday, and are anticipated to verify that 2024 was the worst yr in a long time.

Traders will give their second day verdict on Friday’s Financial institution of Japan’s price hike. The preliminary take gave the impression to be that it was a ‘hawkish hike’, however Japanese cash markets are nonetheless pricing in solely one other 25 foundation factors of tightening this yr, unchanged from pre-Friday ranges. This means BOJ steerage was truly fairly impartial, and Japanese inventory futures are pointing to a powerful rise on Monday.

In the meantime, South Korean markets shall be delicate to the information that prosecutors on Sunday indicted impeached President Yoon Suk Yeol on costs of main an revolt along with his short-lived imposition of martial regulation on Dec. 3.

Listed below are key developments that would present extra path to markets on Friday:

– China ‘official’ PMIs (January)

– Japan main indicator (November)

– Germany Ifo index (January)