Singapore, Feb 21 (Reuters) - Asian shares have surged to a three-month peak on Friday. Investors are returning to previously neglected Chinese stocks, buoyed by optimism surrounding artificial intelligence. This comes as the narrative of U.S. exceptionalism begins to lose its appeal.
Gold has hovered near a record high and is poised to extend its gains for an eighth consecutive week. The precious metal benefits from safe-haven flows amid concerns over Donald Trump's tariff threats. The backdrop of contentious talks, as the U.S. president pushes for a swift resolution to the Russia-Ukraine war, further supports gold's ascent.
Chinese stocks have experienced a significant upturn recently, driven by DeepSeek's breakthrough in AI, which has reignited interest in China's technological prowess. DeepSeek's innovation has been a key catalyst for changing market sentiment, according to Brian Arcese, portfolio manager at Foord Asset Management.
Earlier this week, Chinese President Xi Jinping convened a rare meeting with some of the country's leading technology figures. He urged them to showcase their talent and express confidence in the strength of China's model and market. Brian Arcese commented, "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."
In contrast, European and U.S. markets seemed set to open on a somber note. EUROSTOXX 50 futures fell 0.11%, and FTSE futures eased 0.08%. Nasdaq futures lost 0.07%, while S&P 500 futures shed 0.09%.
DeepSeek's breakthrough has prompted investors to reconsider their positions in U.S. mega-cap technology stocks, which are currently trading at much higher valuations than their Chinese counterparts. Tony Sycamore, a market analyst at IG, noted, "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."
While the threat of further import duties from Trump continues to cast a shadow over markets, traders are beginning to acknowledge that his second term has been marked by more rhetoric than action on tariffs. The dollar is heading for a third consecutive weekly loss. Investors who had built up significant long positions in anticipation of a trade war are now retreating as Trump equivocates on tariffs.
Several Federal Reserve officials expressed concerns on Thursday about rising inflation risks and the uncertain impact of Trump's trade, immigration, and other policies. The weaker dollar has left sterling at a two-month high of $1.2674, while the euro steadied at $1.0493 ahead of a weekend election in Germany. Meanwhile, the yen fell 0.5% to 150.35 per dollar after comments from Bank of Japan Governor Kazuo Ueda eased fears of a more aggressive rate hike stance.
Data released on Friday showed Japan's core consumer inflation reached 3.2% in January, marking its fastest pace in 19 months. This supports the growing market conviction of a BOJ rate hike by July and a potential third hike by year-end, according to Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
In the commodities sector, oil prices dipped but are on track for a weekly gain. Brent crude oil futures eased 0.21% to $76.32 a barrel, yet they are expected to rise more than 2% for the week. U.S. West Texas Intermediate crude fell 0.22% to $72.32 but is also set for a weekly gain of over 2%.
Reported by Rae Wee; Edited by Kim Coghill and Lincoln Feast.
