💹 Market Report.
📊 Today is Nvidia’s results presentation. As we mentioned in yesterday’s report, Chinese companies, including Tencent, Alibaba, and ByteDance, have significantly increased their orders for Nvidia’s H20 AI chip due to booming demand for DeepSeek’s low-cost AI models. The surge in orders underlines Nvidia’s dominance in the AI chip market and could help alleviate concerns that DeepSeek’s models might cause a slide in AI chip demand.
⚠️ While the U.S. administration is considering restrictions on the sale of the H20 chip to China, the sources cited DeepSeek as the primary reason for the jump in orders. The deployment of DeepSeek AI models is expected to help Chinese chipmakers like Huawei better compete in the domestic market, but Nvidia’s H20 chip remains the industry standard in China.
💡 DeepSeek’s low-cost AI models have shifted the narrative on the gap between US and Chinese firms, raising doubts about the reasons behind US tech companies investing billions in AI. DeepSeek claims its models are 20 to 50 times cheaper to use than OpenAI’s most advanced models, depending on the task. However, some have expressed skepticism about DeepSeek’s success, with the CEO of Scale AI alleging that the company has 50,000 Nvidia H100 chips, which would violate U.S. export controls.
🚀 DeepSeek is accelerating the launch of its successor, the R2, to press home its advantage in the AI market. The rapid development and deployment of DeepSeek’s models in China could further galvanize the country’s efforts to overcome U.S. technological dominance in strategic industries like AI. U.S. President Donald Trump has urged American companies to focus on competing and winning, rather than spending billions on AI.
🇪🇺 In Europe, the Bundesbank reported a record €19.2 billion loss in 2024, its first deficit since 1979, due to rapid eurozone interest rate policy shifts that depleted reserves, following narrowly avoiding losses in 2023 with remaining €700 million in buffers; President Joachim Nagel warned of no foreseeable contributions to government revenues but expressed optimism that the worst is over, as losses stemmed from aggressive ECB rate hikes since 2022 to combat inflation, recently eased as inflation subsides.
📈 Joachim Nagel, a Governing Council member of the European Central Bank (ECB), stated that the ECB is approaching a new regime where monetary policy no longer constrains the economy, and future decisions will be based on incoming data. Nagel expressed confidence that the ECB may reach its 2% inflation target by mid-year. Nagel declined to speculate on whether an interest rate cut is likely at the next ECB meeting, saying “all optionalities are possible” and that his assessment will be based on “new incoming data.” The German economy, Europe’s largest, is expected to contract for three consecutive years from 2023 to 2025, according to state-owned development bank KfW.
🏦 However, more ECB officials argue that QT can continue in the background even as borrowing costs are lowered, as the central bank accumulated around €5 trillion in assets through its stimulus programs.
🤝 Ukraine has agreed with the U.S. on a deal to jointly develop its natural resources, including critical minerals, oil, and gas. The deal is expected to be signed during Ukrainian President Volodymyr Zelenskyy’s planned visit to the U.S. on Friday, which President Trump has said he is open to. The deal came together after the U.S. dropped its earlier demand for Ukraine to commit to paying $500 billion from resource extraction to a fund as repayment for U.S. aid. The framework agreement would create a joint U.S.-Ukraine fund to manage future revenues from Ukraine’s natural resources, but does not yet include specific security guarantees, a key priority for Ukraine. While Ukraine has known deposits of critical minerals, it does not have major rare-earth reserves that are economically viable, contrary to earlier reports of $10 trillion in mineral deposits.
🛡️ U.S. officials see the deal as a first step toward reaching a ceasefire with Russia, as binding Ukraine to the U.S. through economic ties could provide a de facto security shield. The deal raises questions about its substance and whether it is more politically motivated, as it allows both Trump and Zelenskyy to claim a win in their relationship.
📉 Market View:
📉 The Mini S&P 500 futures fell yesterday, reaching a low of 5,925 points before rebounding in the last few hours towards 6,000 points, currently trading at 5,995 points. Meanwhile, Nasdaq 100 futures fell below 21,000 points, but have rebounded upwards, now standing at 21,285 points.
🚗 Of note today is the fall of Tesla, which has accumulated a loss of more than 35% since its highs at the end of 2024, mainly due to the decrease in sales, especially in Europe. It is currently at an interesting level of support at $300, from where new rises could be generated.
💵 The dollar continues to show weakness, with the DXY index at 106.25 points and bouncing back in the last few hours towards 106.50. This allows the EUR/USD pair to remain around the 1.05 level, although without clearly exceeding it, currently trading at 1.0498. As for bonds, their yields are falling in the expectation of further rate cuts in the United States. The yield on the 2-year bond has fallen by almost 7% since last Wednesday, reaching a level of almost 4.05% yesterday.
📊 In Europe, the political turbulence in Germany has not significantly affected the market. Despite the difficulties, the DAX 40 continues to advance slowly towards its historic highs, currently trading at 22,640 points.
🛢️ The approaching expiry of crude oil contracts is generating volatility. The barrel of Brent has fallen below the support levels recorded at $74, reaching lows of $72.20.
🥇 Gold is down slightly from its highs of $2,975 and is currently trading at $2,925.
💻 Finally, Bitcoin continues to weaken, losing the $90,000 level, hitting lows of $86,000 before rebounding upwards to the current $88,590.
🌍 Geopolitics:
🇹🇷 Turkey positions itself as the EU’s savior, with Erdogan asserting that Ankara’s EU membership could address issues stemming from the war in Ukraine, bolster European defense, and rejuvenate the continent’s aging population, while also supporting Ukraine’s NATO membership. Turkey, a NATO country, is still seeking to join BRICS.
⚔️ If US no longer wants to go to war with Russia, someone will have to continue this mission. The UK is in discussions to convene a group of European leaders for further talks about Russia’s war in Ukraine, potentially as soon as this Sunday. The meeting would be a follow-up to the summits held last week in Paris by French President Emmanuel Macron. European leaders are engaged in an intense diplomatic effort to persuade U.S. President Donald Trump not to rush into a ceasefire deal with Russia. However, Trump appeared to speed ahead with his plans to end the war without input from European nations or Ukraine, stating he is in “serious discussions” with Russian President Vladimir Putin.
💣 Germany’s Social Democrats (SPD) have indicated they are open to financing a significant increase in military spending, either by loosening rules restricting government borrowing or creating another special fund. And the opposition, the conservative CDU/CSU bloc under chancellor-in-waiting Friedrich Merz is already in discussions with the SPD to secure their backing for as much as €200 billion ($210 billion) in debt-financed defense spending. Without the required two-thirds majority in the new parliament, Germany’s mainstream parties don’t have enough votes to ease the constitutional borrowing limit, known as the debt brake. Any measures to push through reforms in the current parliament before the new one is sworn in may raise political and legal questions, as it could be seen as a subversion of democracy.
