Key events
Richard Hunter, head of markets at the investment platform interactive investor, has looked at the Chinese startup DeepSeek.
Its new AI app comes ahead of corporate results from the big US tech companies.
There appears to be a new kid on the tech block and the early signs are that the last week of January will provide the first sustained bout of volatility in the New Year.
Chinese AI company DeepSeek has released a new product which has a fraction of the development costs seen in the US and which could also provide some defence against any restrictions placed on China by the US as this particular battle intensifies. Japanese chip-related stocks dropped sharply overnight and although it is too early to say with total certainty, US futures are currently looking weak ahead of the opening bell today.
It is far too early to describe DeepSeek as an existential threat to US-based AI solutions. By the same token, it will almost certainly put the cat among the pigeons as investors scramble to assess the potential damage it could have on a burgeoning industry which has powered much of the gain seen in the main indices over the last couple of years. The emerging news over the weekend of an emerging threat to the US dominance seen thus far comes ahead of a week which sees four of the “Magnificent Seven” report earnings, namely Meta Platforms, Microsoft, Tesla and Apple. Quite apart from the results they provide, the larger question has suddenly become whether the hundreds of billions of dollar investment in AI needs re-evaluation.
The news comes after a weaker close on Friday for the US market, when the benchmark S&P 500 gave up gains which saw it briefly break new highs, and ended the week 0.3% lower. Hunter added:
The new president’s pro-business rhetoric has been positive for the markets to date, while his promised severe actions on tariffs have yet to materialise, at least for the moment. Despite the weakness and leading into the end of January, the Dow Jones has added 4.4% so far this year, with gains of 3.7% and 3.3% for the S&P500 and Nasdaq respectively.
Quite apart from any AI considerations, investors will need to spin several plates this week. Corporate updates switch into top gear, with releases from the likes of Boeing, Starbucks, Intel, IBM, Chevron and Exxon Mobil after what has been a promising start to the season.
The core Personal Consumption Expenditures report will also be released on Friday and, while the Federal Reserve’s preferred measure of inflation will give the latest view on rising prices, it will also come after the Fed has announced its latest interest decision, where the market has overwhelmingly priced in a no-change decision.
Shares in WHSmith jumped as much as 8% after it put its 500 UK high street stores up for sale.
The surprise move to hoist the “for sale” sign over its over its legacy retail business creates uncertainty for its 5,000 staff, but was welcomed by investors.
The 232-year-old chain is in talks with a handful of potential bidders, having kicked off the prospective sale process at the end of last year.
While negotiations are focused on its 500 shops – which sell newspapers, books, stationery, cards and gifts – it is understood that the use of the brand itself will be up for negotiation with any prospective buyer.
Introduction: GSK strikes £50m deal with Oxford University on cancer vaccines; dollar rises after Trump U-turn on Colombia tariffs
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Britain’s second-biggest drugmaker GSK has struck a deal with the University of Oxford under which it will pump up to £50m into early cancer research to develop new treatments.
The partnership lasts at least three years, and will focus on how cancer develops that could inform future development of cancer vaccines.
Most cancers take years or even decades to develop from normal cells to precancerous cells to cancer. Oxford University specialises in the study of precancer biology including the identification and sequencing of neoantigens, or tumour-specific proteins that prompt the immune system to recognise cancer. An active intervention like a vaccine or targeted medicine could prevent them from progressing to cancer.
Professor Irene Tracey, vice-chancellor of the University of Oxford, hailed the partnership as “a step forward in cancer research”.
Tony Wood, GSK’s chief scientific officer, said:
We’re pleased to further strengthen our relationship with Oxford University and to combine the deep knowledge of Oxford and GSK scientists. By exploring precancer biology and building on GSK’s expertise in the science of the immune system, we aim to generate key insights for people at risk of developing cancer.
GSK already has a partnership with the Institute of Molecular and Computational Medicine in Oxford, which focuses on neurological diseases, as well as other collaborations including one with the University of Cambridge announced in October, which focuses on hard-to-treat kidney and respiratory diseases.
The US dollar rose after Donald Trump threatened tariffs and sanctions on Colombia for turning away military aircraft carrying deported migrants, before a last-minute deal was agreed.
The dollar is up by 0.3% against a basket of major currencies.
The US and Colombia pulled back from the brink of a trade war on Sunday after the White House said the Colombians had agreed to accept military aircraft carrying deported migrants.
In a statement late on Sunday, the White House said Colombia had agreed to accept the migrants and Washington would not impose its threatened penalties.
European stock markets have opened lower, and US stock futures and several Asian markets have also fallen after the Chinese startup DeepSeek launched a free open-source AI model to rival OpenAI’s ChatGPT.
Traders are worried about the impact of the low-cost Chinese app on Western tech stocks.
The UK’s FTSE 100 index dropped by 0.3% or 31 points, to 8,470, while Germany’s Dax lost 0.9%, France’s CAC was flat and Spain’s Ibex and Italy’s FTSE MIB both fell by around 0.3%.
In Asia, Japan’s Nikkei fell by 0.9%, while Hong Kong’s Hang Seng rose by 0.6% and South Korea’s Kospi gained by 0.85%. In mainland China, the Shanghai Composite slipped by 0.06% while the Shenzhen Composite fell by 1.3%.
The Agenda
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9am GMT: Germany Ifo Business confidence for January
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3pm GMT: US New home sales for December
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3.35pm GMT: ECB President Christine Lagarde speaks
