Asian Markets Diverge in Thin Trade as AI Shake-up and Fed’s Rate Pause Take Center Stage
Asian markets displayed mixed performances on Thursday as investors digested the latest tech earnings and the ongoing impact of China’s AI breakthrough, DeepSeek.
With several markets closed for the Lunar New Year, trading remained subdued, while the Federal Reserve’s decision to maintain interest rates did little to stir activity.
The cautious sentiment followed a downturn on Wall Street, where major indexes slipped amid concerns over inflated tech valuations. Earlier in the week, China’s DeepSeek stunned the AI industry by unveiling a chatbot rivaling top U.S. AI firms—at a fraction of their investment costs.
The announcement triggered a sell-off in AI-related stocks, with chipmaker Nvidia losing nearly $600 billion in market value.
AI Disruptions and Tech Volatility
While some tech stocks have since recovered, skepticism remains high. Analysts warn that the AI sector is still under pressure, with investors wary of potential overvaluations.
Stephen Innes of SPI Asset Management commented, “The AI sector is still feeling the heat, with bearish sentiment gaining momentum as investors question tech stock valuations.”
U.S. tech firms are now closely monitoring the rise of DeepSeek, which has injected new competition into an already heated AI race.
Meanwhile, companies like Meta, IBM, and Tesla reported strong earnings, while Microsoft’s results disappointed investors.
Federal Reserve Holds Rates Steady
The Federal Reserve’s decision to keep interest rates unchanged was widely expected, but its latest statement signaled that inflation remains a concern.
Fed Chair Jerome Powell stated, “We are not in a hurry to adjust our policy stance,” reinforcing expectations that rate cuts are unlikely in the near future.
Former U.S. President Donald Trump renewed his criticism of the Fed, calling for immediate rate cuts, but Powell remained unfazed, stating that policymakers would “wait and see” how economic conditions evolve.
Market Reactions Across Asia
Following the Wall Street downturn, Asian stock markets showed varied performances:
Tokyo’s Nikkei 225 rose 0.2%
Sydney’s ASX gained modestly
Wellington, Manila, and Jakarta recorded slight losses
Shanghai and Hong Kong remained closed for the holiday
Meanwhile, the oil market saw slight gains, with Brent Crude rising to $76.68 per barrel and West Texas Intermediate (WTI) climbing to $72.80.
What’s Next for Global Markets?
As earnings season continues, investors will be watching closely for further tech sector developments and signals from the Fed regarding future rate moves.
Apple’s earnings report, due Thursday, is expected to provide more insights into market sentiment.
With AI disruptions reshaping the industry and inflation concerns persisting, global markets are bracing for more volatility in the coming weeks.
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