Asian shares surged to a three-month peak on Friday as buyers returned to previously unloved Chinese stocks thanks to optimism over artificial intelligence, while the U.S. exceptionalism narrative continued to lose its shine.
Gold hovered near a record high and was set to extend its gains for an eighth consecutive week. The precious metal was helped by safe-haven flows due to concerns over Donald Trump’s tariff threats and amid contentious talks as the U.S. president pushes for a quick deal to end the Russia-Ukraine war.
MSCI’s broadest index of Asia-Pacific shares outside Japan jumped more than 1% to its highest since November 8 on Friday, putting the index on track for a sixth straight week of gains – the longest such winning streak in over two years.
The move came as a result of a surge in Hong Kong- and China-listed stocks, which saw the Hang Seng Index scale a three-year peak and push the CSI300 index 1% higher.
Hong Kong’s tech shares advanced 4.7%, while the Shanghai Composite Index rose 0.7%.
Chinese stocks have been on a tear in recent days, driven by DeepSeek’s AI breakthrough that reignited investor interest in China’s technology capabilities.
While the Hang Seng Tech Index has gained nearly 30% for the year thus far, the S&P 500 is up just 4% over the same period.
“DeepSeek has been a catalyst for sentiment changing,” said Brian Arcese, portfolio manager at Foord Asset Management.
Earlier this week, Chinese President Xi Jinping held a rare meeting with some of the biggest names in China’s technology sector, urging them to “show their talent” and be confident in the power of China’s model and market.
“I think that is a shift in China. These things are done for a reason, nothing’s really coming out of the meeting other than the fact that we’re showing that we’ve met… but that is a big signal, you don’t do that lightly,” said Arcese.
In contrast, markets in Europe and the U.S. looked set to open on a dour note, with EUROSTOXX 50 futures falling 0.11% and FTSE futures easing 0.08%.
Nasdaq futures lost 0.07%, while S&P 500 futures shed 0.09%.
DeepSeek’s breakthrough has not only had investors turning their attention back to China, but also second-guessing crowded positions in mega-cap U.S. technology stocks currently trading at much higher valuations than their Chinese peers.
Also souring U.S. sentiment, Thursday’s downbeat forecast from Walmart, the world’s largest retailer, stoked concerns about the outlook for the world’s largest economy.
“The footing that the U.S. economy was thought to be on is starting to show a few little cracks, in terms of the exceptionalism of the AI and technology aspect… you’re seeing some cracks in the growth narrative that the U.S. economy is just so much better than the rest of the world,” said Tony Sycamore, a market analyst at IG.
Elsewhere, Japan’s Nikkei edged up 0.17%.
DOLLAR EASES
While the threat of further import duties from Trump continued to cast a pall over markets, traders are also sobering up to the fact that the start of his second term has been mostly bluster on the tariff front.
The dollar was headed for a third straight weekly loss, as bulls who had built up big long positions in anticipation of a trade war have backed off while Trump equivocates about tariffs.
Several Federal Reserve officials on Thursday said they are taking note of what they see as rising inflation risks and the uncertain impact of Trump’s trade, immigration and other policies.
The weaker dollar left sterling at a two-month high of $1.2674, while the euro steadied at $1.0493 ahead of a weekend election in Germany.
The yen , meanwhile, fell 0.5% to 150.35 per dollar, as comments from Bank of Japan Governor Kazuo Ueda eased concerns that the central bank may be considering a more aggressive rate hike stance.
Data on Friday showed Japan’s core consumer inflation hit 3.2% in January, its fastest pace in 19 months.
“The data supports the growing market conviction of a BOJ rate hike by July, and a possible third hike by year-end,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
In commodities, oil prices dipped but were headed for a weekly gain.
Brent crude oil futures eased 0.21% to $76.32 a barrel, but were set to rise more than 2% for the week. U.S. West Texas Intermediate crude fell 0.22% to $72.32, but was also on track for a weekly gain of over 2%.
Source: Reuters
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