Markets in Turmoil: AI Shakeup Hits Tech Stocks, Tariff Announcement Boosts USD

Today's expected range for the Canadian Dollar against the major currencies:

US Dollar         1.4300-1.4510

Euro                 1.4920-1.5140

Sterling            1.7810-1.8030

WTI Oil (opening level) $73.71

The CAD opens today at 1.4415 (0.6937).

The recent market turbulence was driven by the Chinese startup DeepSeek AI, which has introduced a cost-effective AI solution capable of rivaling leading technologies. This development has significantly impacted the valuations of major US tech companies, causing global equity markets to decline. Notably, Nvidia experienced a 17% drop in value, erasing approximately $589 billion in market capitalization. Other AI-related stocks also saw sharp declines as the market reacted to the disruptive potential of DeepSeek's open-source, transparent model.

In response to the equity sell-off, the USD did not serve as the primary safe haven. Instead, the Japanese yen (JPY) and Swiss franc (CHF) were preferred by the market. However, the USD rebounded strongly after comments from former President Trump, who hinted at "much bigger" universal tariffs than initially anticipated. These remarks boosted the USD index significantly by the morning.

Key Headlines:

• US Dollar Surge: Comments on universal tariffs by former President Trump have strengthened the USD. Trump suggested tariffs beyond the expected 2.5%, stating they would be designed to "protect our country."
• Equity Stabilization: Following significant losses, risk sentiment stabilized. S&P 500 futures recovered approximately half of their intraday losses.
• AI Disruption: DeepSeek AI's entry into the market has introduced high-performing, low-cost AI technology, challenging established players and disrupting the tech sector.
• Safe Haven Preferences: Despite the equity sell-off, JPY and CHF emerged as the preferred safe haven currencies, overshadowing the USD.
• Volatility: The VIX volatility index surged as short-term risk perceptions heightened.
• Commodities: Crude oil rose on supply concerns in Libya, while gold maintained its position above key support levels.

Market Key Points:

• Equities: Tech rout spreads as DeepSeek AI's innovation impacts valuations, with Nvidia leading the losses.
• Digital Assets: Bitcoin stabilized after recent fluctuations, with altcoins displaying mixed trends.
• Fixed Income: The US 10-year Treasury yield tested the 4.50% benchmark but held firm.

The global markets are now closely monitoring the evolving impacts of AI disruption, changes in safe haven dynamics, and potential policy shifts from major economies.