EMISSIONS: UKAs Recover, Narrow Discount to EUAs
UKAs Dec25 have seen are recovery around midday GMT to rise to the highest since 20 January. The UKA...
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BONDS: Off Highs As E-minis Stabilise
Broader risk-sentiment continues to dominate. Core global FI markets have ticked away from session highs as e-minis find a bit of a pre-market base over the last couple of hours.
- Speculation linked to Chinese firm DeepSeek’s AI advancements continues to dominate discussions (details on feedthrough for chip capex, efficacy of sanctions on China and risks to U.S. tech dominance all getting some airtime).
- The 7- to 10-Year zone leads the rally on the U.S., German & UK curves, with Tsys outperforming given perceived risks to U.S. tech.
- Yields on the Tsy curve are 8-11bp lower. 1.5-3.0bp off lows. Benchmarks out to 20s registered fresh ’25 lows during the London morning rally.
STIR: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.34% (-0.01), volume: $2.289T
- Broad General Collateral Rate (BGCR): 4.33% (-0.01), volume: $912B
- Tri-Party General Collateral Rate (TGCR): 4.33% (-0.01), volume: $875B
- (rate, volume levels reflect prior session)
EQUITIES: DeepSeek Sell-Off Cemented, Linked Stocks Sit Sharply Lower Pre-Market
Pre-market weakness in both direct and indirectly linked AI names sticks into the cash open - as DeepSeek's success undermines the AI-driven US equity rally.
Pre-market, e-mini S&P off by 2.3%, NASDAQ futs off 3.9%:
- Nvidia shares lower by 11.3%(earnings Feb 26th)
- Meta Platforms lower by 3.8% (earnings on Wednesday)
- Microsoft lower by 6.0% (earnings on Wednesday)
- Tesla lower by 4.3% (earnings on Wednesday)
That primes markets to shed over $700bln in market cap at the open across those four stocks alone. Why is Deepseek different? Deepseek's open-source, free-to-play approach twinned with highly regarded efficiency and accuracy undermines not only the revenue-generating capacity of models produced by OpenAI, Alphabet, Meta and others - but also the significant levels of investment in AI from US firms over the past five years. It also shows the ability of Chinese firms to skirt chip sanctions targeted at limiting their AI capacity.
More here: https://www.mnimarkets.com/articles/deepseek-why-is-this-app-undermining-markets-1737968390827
