(Bloomberg) — Asian stocks trimmed gains as an AI-fueled rally in Chinese technology shares faded and investors remained cautious due to tensions between the US and European Union over tariffs and the war in Ukraine.
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A gauge of Asian shares rose 0.3%, after earlier reaching the highest level since November, while equities in Hong Kong and an index of technology stocks retreated as some investors perceived the gains as being overdone. Treasury futures edged lower with cash trading closed globally due to Presidents’ Day in the US. European equity index futures pointed to a muted open.
The volatile start to the week came after DeepSeek’s breakthrough in artificial intelligence had spurred a more than $1 trillion rally in Chinese shares. Investors are also monitoring a ratcheting up in tensions between the US and Europe after President Donald Trump’s tariff plans sparked threats of retaliation. German and French bond futures dropped amid concern European governments may have to boost military spending.
Investors had piled into technology shares, especially in China, amid optimism over DeepSeek’s AI app. A meeting between President Xi Jinping and business figures including e-commerce icon Jack Ma on Monday was also seen as catalyst for gains.
“Some investors chose to take profit as there had been very high expectations of the meeting between Xi and private business entrepreneurs,” said Shen Meng, a director at boutique investment bank Chanson & Co.
The meeting was “a good sell-the-news event” after two weeks of advances in the Hang Seng Tech Index for Vey-Sern Ling, a managing director at Union Bancaire Privee.
Goldman Sachs Group Inc. strategists raised their MSCI China index target on optimism over the country’s technological advancements. Meanwhile, investor Michael Burry had rolled back on some of his investments in Chinese tech stocks just before DeepSeek’s breakthrough.
Trump’s tariff plans have sparked threats of retaliation while Vice President JD Vance attacked longstanding European allies at a security conference at the weekend. Plans to negotiate an end to the war in Ukraine have left the bloc on the sidelines.
Investors may demand higher yields on government debt across the European region on concern officials will seek to beef up military investment. Upgrading defense and protecting Ukraine may cost Europe’s major powers an additional $3.1 trillion over 10 years, according to Bloomberg Economics estimates. The euro was rangebound on Monday.
“The scope for a further rally in European FX on a potential Russia-Ukraine ceasefire deal is limited,” Barclays Plc analysts led by Sheryl Dong wrote. “Provisional details are negative for Europe’s security and the war premium is low.”
Japan’s economy expanded for a third straight quarter as companies boosted investment and net exports improved. The yen strengthened against all its Group-of-10 peers after better-than-expected gross-domestic-product data bolstered expectations of interest-rate hikes from the Bank of Japan.
Elsewhere in Asia, Westpac Banking Corp.’s shares slid as much as 6.2% after profit and margins slipped.
In commodities, oil steadied after a string of declines as the prospect of increased flows from Iraq and Russia weighed on the outlook.
Some of the key events this week:
Presidents Day holiday in the US; bond and stock markets are closed, Monday
Australia rate decision, Tuesday
UK jobless claims, unemployment, Tuesday
Bank of England Governor Andrew Bailey speaks, Tuesday
Canada CPI, Tuesday
New Zealand rate decision, Wednesday
Indonesia rate decision, Wednesday
UK CPI, Wednesday
South Africa CPI, retail sales, Wednesday
US FOMC minutes, housing starts, Wednesday
Australia unemployment, Thursday
China loan prime rates, Thursday
Eurozone consumer confidence, Thursday
G-20 foreign ministers meet in South Africa, Thursday – Friday
Reserve Bank of Australia Governor Michele Bullock and officials testify to parliamentary committee, Friday
