28 January 2025
The S&P 500 declined 1.5%, with the tech-heavy Nasdaq sinking 3.1% as a low-cost Chinese artificial intelligence (AI) model raised concerns about demand outlook across the AI supply chain.
US Treasuries rallied (yields fell) following sell-offs in US tech heavyweights and strong results from the 2-year and 5-year Treasury debt auctions. 10-year yields decreased by 9bp to 4.53%.
European stock markets were lower on Monday weighed down by the technology sector after a new China AI model sparked concern for AI rivals’ profits. The Euro Stoxx 50 closed 0.6% lower. The German DAX fell 0.5%, with the French CAC losing 0.3%. In the UK, the FTSE-100 closed flat.
European government bonds rose (yields fell) on Monday following weaker equity markets. 10-year German yields fell 4bp to 2.53%, with 10-year French yields down 3bp to 3.27%. In the UK, 10-year gilt yields dropped by 5bp to 4.58%.
Asian stock markets traded mixed on Monday as investors assessed the latest tech developments following the launch of a new AI app by a Chinese start-up. Japan’s Nikkei 225 fell 0.9%, driven by losses in chip-related shares. In contrast, Hong Kong’s Hang Seng gained 0.7%, while China’s Shanghai Composite edged down 0.1% ahead of the week-long Lunar New Year holidays. Meanwhile, India’s Sensex declined 1.1% amid ongoing investor caution regarding the earnings outlook.
Crude oil prices fell on Monday amid weaknesses in equity markets, and as investors continued to assess the new US administration’s policies. WTI for March delivery settled 2% lower at USD73.2 a barrel.
China’s January Official PMI figures surprised to the downside. The Composite PMI dropped to 50.1 in January, from 52.2 in December, with the manufacturing gauge falling back into contractionary territory ahead of the Lunar New Year holidays.
In the US, the Conference Board Consumer Confidence Index is forecast to nudge higher to 105.9 in January from 104.7 in December. The index has been range-bound since mid-2022, despite the labour market cooling significantly over that period.
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