Tech rallies as DeepSeek panic fades

Good morning. Here's what happened overnight and what you need to know today.

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1.

Market rebound: Global tech stocks partly rebounded after Monday’s DeepSeek-inspired rout, as investors prepared for the megacap earnings season and the Federal Reserve’s rate decision. The S&P 500 was 0.86% higher, the Nasdaq 100 up 1.80% and Nvidia had rebounded 6.66% in afternoon trading, after its largest value loss in history. Microsoft shares were 2.57% higher after Trump said it was in talks to acquire TikTok’s US operations. General Motors dropped more than 10%, driven by tariff fears even as the carmaker earnings exceeded expectations. Monday’s selloff, driven by cost-effective advancements from Chinese AI startup DeepSeek, spurred USD4.3 billion in inflows to the Invesco QQQ fund and record investments in semiconductor ETFs. Analysts foresee a more selective approach to AI investments as profit growth for major tech firms slows to its weakest pace in nearly two years. Bond yields climbed to 4.57%, and the US dollar strengthened by 0.3%. (Bloomberg)

2.

Deals retreat: HSBC is making its largest retrenchment from investment banking in decades, shutting down mergers and acquisitions (M&A) advisory and equity capital markets (ECM) businesses in Europe, the UK, and the Americas. CEO Georges Elhedery’s aggressive restructuring is refocusing the bank on Asia and the Middle East, where profitability and growth are stronger. “We will retain more focused M&A and equity capital markets capabilities in Asia and the Middle East, and we will look to wind-down those activities in Europe, the UK and the Americas,” the company said in an internal memo. HSBC will also retain debt capital markets and leveraged finance operations globally, completing ongoing deals before phasing out roles, with some staff redeployed to priority regions. The move aims to save USD3 billion ($4.80 billion) annually, about 10% of its USD32.6 billion expense base. Analysts are split on the timing, given expected US capital market and deal-making growth. HSBC shares dipped slightly. (Capital Brief)(Bloomberg)(Reuters)

3.

X wallet: Elon Musk's X announced a partnership with Visa to power its new X Money digital wallet and peer-to-peer payment service. Visa Direct will enable real-time transfers, letting users load wallets, link debit cards, and transfer funds to bank accounts, CEO Linda Yaccarino revealed in a social media post. She called the partnership the first of several major announcements for X Money in 2025. According to CNBC, the service is expected to launch in Q1 2025 and forms part of Musk’s vision for X as an "everything app," broadening its financial features. X has secured money transmitter licences in over 40 US states via X Payments, and app researchers have uncovered code indicating X Money will allow creators to accept payments and store funds, though it may not be available in all states initially. Visa declined to comment. (Capital Brief) (Linda Yaccarino post)(CNBC)

4.

Confidence cracks: US consumer confidence fell to a four-month low in January, with the Conference Board index declining to 104.1 from 109.5 in December. Economists polled by Reuters had forecast a rise to 105.6. The drop reflected reduced optimism about the labour market and the economy. The share of consumers saying jobs were plentiful reached its lowest level since September, while more respondents said jobs are hard to get. Buying conditions for big-ticket items, including cars, houses and appliances, weakened due to high borrowing costs and persistent inflation, while vacation plans, particularly for international travel, also fell to their lowest point since October 2022. Inflation expectations for the coming year rose, with write-in responses showing more than half of consumers expect higher interest rates. (Capital Brief)(Conference Board)(Reuters)

5.

AI contrarian: Short sellers pocketed over USD9 billion on Monday as AI-related stocks, led by Nvidia, faced a selloff following the rise of Chinese startup DeepSeek’s low-cost AI models. Retail investors defied the rout, buying a record USD562 million in Nvidia shares, even as DeepSeek’s rise sparked fears about US dominance in AI. OpenAI countered on Tuesday launching ChatGPT Gov, a government-focused version on Microsoft Azure. Hedge fund Bridgewater said DeepSeek’s success is a catalyst for broader AI adoption even as it warned it could trigger a short-term correction on tech stocks. The Black Swan author Nassim Taleb also said Monday was “just the beginning of an adjustment of people to reality,” predicting further corrections in AI stocks, while Goldman Sachs’s global equity strategist Peter Oppenheimer said the selloff doesn’t change the fundamental story, downplaying long-term concerns. (Reuters)

6.

Trump halt: The Trump administration paused federal grants, loans and financial aid, in a sweeping overhaul to advance its policy priorities, triggering global alarm over the potential fallout. Medicare, Social Security and direct individual assistance are exempt. The State Department suspended mine-clearing operations and foreign aid, with experts warning of deadly risks in nations like Vietnam and Cambodia. The Trump administration also ordered a halt to disbursing US-funded HIV medications, even if already purchased and stored in clinics. A coalition of nonprofits filed a case in federal court seeking to immediately block Trump’s directives. At USAID, dozens of officials were placed on leave for what Trump officials characterised as resistance to his policies. Elsewhere, military directives included authorising policies to bar transgender personnel and reinstating service members previously dismissed for refusing Covid-19 vaccines. Meanwhile, the Senate confirmed gradual universal tariff proponent Scott Bessent as Treasury secretary, and acting US Attorney General James McHenry fired more than a dozen DOJ prosecutors involved in special counsel Jack Smith’s investigations into Trump, saying they could not be trusted to “faithfully implement” the president’s agenda. (NYT)

7.

TikTok talk: Donald Trump said Microsoft is in talks to acquire TikTok and expressed support for a competitive bidding process for the platform. TikTok, with over 170 million American users, is subject to a law requiring ByteDance to divest its US operations on national security grounds. Trump signed an executive order delaying enforcement of this law by 75 days and encouraged other bidders to step forward. AI startup Perplexity AI has proposed merging with TikTok, offering the US government a stake in the new company, while billionaire Frank McCourt has also submitted a bid. Microsoft and Oracle previously explored acquiring TikTok in 2020 under similar pressure, but those talks collapsed. Microsoft CEO Satya Nadella called the 2020 negotiations “the strangest thing I’ve ever worked on.” Microsoft and ByteDance have not commented on the current situation. (Reuters)(Bloomberg)

8.

Crypto probe: French prosecutors opened a judicial investigation into Binance, the world’s largest cryptocurrency exchange, over allegations of money laundering, tax fraud and operating without necessary approvals between 2019 and 2024. The Paris prosecutor's office (JUNALCO) linked the probe to suspected laundering involving drug trafficking and complaints from users who claim to have lost money due to incorrect platform information. Binance denies the accusations and has pledged to fight the charges, saying it has improved its compliance measures. The probe follows founder Changpeng Zhao’s US conviction last year for money laundering violations that resulted in a USD4.3 billion fine. Binance also faces legal scrutiny in other countries, including Australia and the US. (Reuters)