Stocks firm after tech rout; dollar steady before Fed rate call ~ EconomyLens.com

London (AFP) – Stock markets mostly rose Wednesday, tracking a rally on Wall Street, where tech titans led by Nvidia recovered some of their hefty losses thanks to easing worries over Chinese artificial intelligence startup DeepSeek. Investors were awaiting the conclusion of the Federal Reserve’s interest-rate policy meeting later in the day as well as major earnings, including from Meta, Microsoft, and Tesla.

“Calm has descended on financial markets after the AI upheaval, which triggered a wave of selling this week, with investors seeing sharp falls as a buying opportunity,” noted Susannah Streeter, head of money and markets at Hargreaves Lansdown. DeepSeek’s unveiling of its R1 chatbot has apparently shown the ability to match the capacity of US AI pace-setters for a fraction of the investments made by American companies. The news hammered tech firms on Monday, with US chip giant and market darling Nvidia collapsing almost 17 percent and wiping almost $600 billion from its market capitalisation—a record single-day loss for a publicly traded company.

Tuesday saw a tech rebound, with Nvidia surging 8.8 percent, as some analysts voiced doubts over whether DeepSeek’s AI was developed as cheaply as it claims. Shares in Dutch tech giant ASML, which sells cutting-edge machines to make semiconductors, soared more than 11 percent on Wednesday after it reported solid orders in the fourth quarter. DeepSeek’s arrival raised questions about whether the vast sums of cash invested in AI in the past few years may have been overdone, but observers said the industry could benefit in the long term from competition pushing down costs.

All three main Wall Street indices rose Tuesday, with the Nasdaq gaining two percent and the S&P 500 almost one percent—both clawing back most of Monday’s losses. Tokyo followed suit Wednesday, having taken a heavy hit over the previous two days as its chip companies tanked. There were gains also in Sydney, Wellington, and Mumbai, though Bangkok dipped. Chinese indices were closed for holidays.

European stock markets mostly rose in morning deals, though Paris was dragged lower by heavy falls to shares of luxury companies. It comes one day after LVMH, Europe’s largest company by market value, said its net profit slid 17 percent last year to 12.6 billion euros ($13 billion) on falling sales.

– Fed decision –

The Fed is set to stand pat on interest rates Wednesday despite calls by President Donald Trump for the central bank to lower them. Its post-meeting statement, and comments by boss Jerome Powell, will be pored over for clues over the outlook. There are worries Trump’s plans to slash taxes, regulations, and immigration—as well as impose tariffs on imports—will reignite inflation and therefore keep borrowing costs higher for longer. The prospect of rates staying elevated boosted the dollar, which is being lifted also by Trump wanting universal tariffs “much bigger” than the 2.5 percent suggested by Treasury Secretary Scott Bessent. Elsewhere, the European Central Bank is expected to cut eurozone interest rates on Thursday. On the eve of the decision, eurozone member Spain said its economy expanded 3.2 percent last year on buoyant exports and consumption that have made it one of the fastest-growing developed countries.