A Look at the Day Ahead in European and Global Markets

By Tom Westbrook

The exceptionalism that drove Wall Street to record highs, fueled by America’s leading technology firms, now seems vulnerable and less peerless.

Chinese startup DeepSeek’s budget-friendly AI model caused nearly $600 billion to evaporate from chipmaking giant Nvidia’s market value on Monday, shattering the assumptions behind a two-year AI rally.

This unprecedented loss marks the largest drop in value by a single company in a day.

DeepSeek claims to match U.S. AI performance with significantly less data and computing power, giving rise to a rapid reduction of investments in data centers, cable-makers, electricity providers, and various AI-related businesses.

Interestingly, the absence of many such companies in Europe’s markets allowed broader markets in London and the continent to escape the worst impacts of the sell-off.

German software giant SAP held up relatively well on Monday, exceeding earnings forecasts and anticipating growing cloud adoption, although traders may closely examine its projected AI contributions to growth.

ASML, a chip manufacturing equipment maker, saw its shares drop 7% on Monday and may face further pressure as selling continued in Tokyo on Tuesday.

On the calendar for the day are reports on French consumer confidence and full-year earnings from LVMH and Christian Dior.

In Asia, Nasdaq futures and Nvidia shares steadied in after-hours trading, as did equity futures for the FTSE and Europe. Markets in China, Taiwan, and South Korea were closed for a holiday, while Hong Kong’s trading was shortened for Lunar New Year, sharpening focus on Japan.

Shares in Nvidia supplier Advantest fell 11%, marking nearly a 20% downward trend over two days. Similarly, Furukawa Electric, which saw a threefold increase in value last year, is experiencing a notable decline this week.

Among U.S. companies reporting today are Boeing, General Motors, and Starbucks. Later this week, fragile markets await earnings reports from Meta, Microsoft, and Tesla—all scheduled for Wednesday.

Analysts indicate that DeepSeek’s pricing significantly undercuts competitors, potentially prompting a reassessment of AI investments by these companies.

Policy meetings are scheduled later in the week in both the U.S. and Europe. Following Monday’s market downturn, traders are now pricing in about an additional 9 basis points of Federal Reserve easing. A rate cut in Europe is almost guaranteed for Thursday.

Key Developments That Could Influence Markets on Tuesday:
– Earnings Reports: SAP, Dior, LVMH, Boeing, Starbucks, Lockheed Martin, General Motors
– Economic Indicators: French consumer confidence, ECB bank lending survey