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Deepseek

This week is filled with significant events, including:

- Corporate Earnings: Reports from Meta, Microsoft, ASML, and others are expected.
- Federal Reserve Meeting: Rates are projected to remain unchanged at 4.25%/4.50%.
- ECB Rate Decision: A 25 basis points cut is anticipated, lowering rates to 2.75%/2.90%.
- Other Central Banks: Sweden and Canada are also expected to announce rate cuts.
- U.S. PCE Deflator: Due on Friday, with an expected increase to +2.6% from +2.4%.

Market Overview
Last Monday, we observed that the improved market sentiment from the previous week was likely to solidify, which has indeed occurred. This week may follow a similar path, although the beginning of Monday could be affected by some "technological noise" due to the emergence of DeepSeek, a Chinese AI development alternative. DeepSeek utilizes simpler chips and may present a short-term challenge to dominant AI models from companies like Nvidia and ChatGPT. Currently, Nasdaq-100 futures are down approximately 2.5%, but the long-term impact of DeepSeek is still uncertain.

Focus of the Week
The primary focus will be on whether the Fed and ECB adopt a more cautious tone following the strong PMI data released last Friday. However, a significant policy shift seems unlikely at this stage. Additionally, geopolitical developments, such as Trump's pro-market messaging and discussions surrounding a potential ceasefire in Ukraine, could bolster risk sentiment by reducing geopolitical risk premiums. This may provide further upside for equity markets, which currently appear fairly valued unless a major catalyst emerges.

Market Implications
A positive reassessment of the market is possible, but much will depend on how the tech sector stabilizes following the news about DeepSeek. While the week has the potential to remain bullish, as seen in the previous two weeks, the initial confusion regarding DeepSeek's impact suggests we should wait for clearer signals before confirming any sustained improvement in the market.
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