Asia-Pacific markets trade following a sell-off on Wall Street overnight amid concerns over Chinese startup DeepSeek’s free open-source AI model challenging the dominance of U.S. AI leaders triggered a risk-off sentiment. Traders also remained cautious ahead of the February 1 deadline for the first round of tariffs targeting China, Mexico, and Canada, as previously announced by the President. Cautious traders also braced for interest rate moves from major central banks later this week, notably the US Federal Reserve and the ECB. Japan ( NKY:IND ) dropped 1.4% to around 39,000, while the broader Topix Index lost 0.6% to 2,740 on Tuesday, extending losses from the previous session. The Japanese yen fell below 155.5 per dollar on Tuesday, retreating from six-week highs. Investors are now focused on upcoming labor, inflation, and other economic data for further guidance. China ( SHCOMP ) market closed, the offshore yuan weakened to around 7.28 per dollar, extending losses from the previous session, as investors grappled with concerns over heightened tariff threats from US President Donald Trump. Late Monday, Trump announced plans to impose tariffs on key imports, including computer chips, pharmaceuticals, and steel, to boost US manufacturing. Hong Kong ( HSI ) rose 0.34% hovering around 20,210 after gaining in the prior two sessions. Trading was notably sluggish, with markets set to close early as the Lunar New Year looms large. India ( SENSEX ) rose 0.88% to 75,717 in morning trade on Tuesday, halting losses in the previous two sessions and moving away from their lowest level in over seven months the day before. This gain was mainly driven by increases in banking and financial services stocks following the RBI's statement of several measures to boost liquidity in the banking system. Australia ( AS51 ) fell 0.12% to around 8,415 on Tuesday, marking its second consecutive day of gains as investors returned from the holiday-extended weekend. Australia’s NAB business confidence index inched up to -2 in December 2024 from -3 in the prior month despite marking the second straight month of negative prints. Investors are now eyeing Australia’s quarterly inflation data later this week, seeking insights into the Reserve Bank of Australia’s next move on interest rates. In the U.S., on Monday, all three major indexes ended mostly lower, particularly in the tech sector, fueled by mounting concerns over-investment in the AI sector, following the emergence of Chinese startup DeepSeek. U.S. stock futures steadied on Tuesday following a sharp selloff in the previous session, particularly in artificial intelligence-related stocks: Dow -0.25% ; S&P 500 -0.07% ; Nasdaq + 0.09% . Investors now turn their attention to upcoming earnings reports, the latest Federal Reserve decision, and an important inflation reading later this week. Currencies: ( JPY:USD ), ( CNY:USD ), ( AUD:USD ), ( INR:USD ), ( HKD:USD ), ( NZD:USD ). More on Asia: China's factory activity unexpectedly contracts in Jan, growth in services sector slows significantly China unveils measures to promote index investments Chinese AI lab DeepSeek rattles Silicon Valley Japan’s core inflation rate surges to 16-month high of 3% in December Bank of Japan raises policy rate to 0.5%, highest since 2008 amid sustained inflation and rising wages
