Tech drags global shares lower on China's AI push

European and Asian shares have slumped as investors weigh the implications of Chinese startup DeepSeek's launch of a free open-source artificial intelligence model to rival OpenAI's ChatGPT.

Meanwhile, the dollar dipped as broad US import tariffs remained on the back burner, even as US President Donald Trump threatened Colombia with levies to punish the country for earlier refusing to accept flights carrying deported migrants.

China's DeepSeek rolled out a free AI assistant that it says uses lower-cost chips and less data, seemingly challenging a widespread bet in markets that AI will drive demand along a supply chain from chipmakers to data centres.

Europe's technology sector led the pan-European STOXX 600 index lower, down 0.7 per cent, while the blue-chip Euro STOXX 50 dropped 1.4 per cent in early European trading.

The STOXX Europe 600 technology index fell as much as 4.6 per cent, its biggest one-day drop since mid-October.

Futures on the tech-heavy Nasdaq Composite in the US tumbled more than 3.1 per cent and S&P 500 futures sank 2.0 per cent.

"China and DeepSeek say, at the very least, that they can deliver what ChatGPT can deliver today at a fraction of the cost," said George Lagarias, investment strategist at Forvis Mazars.

"It makes sense that markets question the narrative that has been underpinning the whole market ... It's a very frothy market so it doesn't really take that much for investors to take some profit."

Shares of AI-bellwether Nvidia, which have risen more than 800 per cent since the start of 2023, were down over 7.0 per cent in pre-market trade.

Japan's Nikkei dropped 0.9 per cent, reversing an initial advance.

New Zealand's equity benchmark slipped 0.2 per cent and Singapore's Straits Times index eased 0.1 per cent.

At the same time, Hong Kong's Hang Seng rallied 0.7 per cent and Chinese mainland blue chips dipped 0.4 per cent after data showed a surprise contraction in manufacturing in January.

In currency markets, the dollar dipped, as Trump has so far refrained from implementing broad-based US import tariffs, but China, Mexico and Canada face a nervy wait with Trump last week earmarking February 1 for additional tariffs on the United States' top trading partners.

The dollar rose one per cent against the Mexican peso on Monday and 0.1 per cent against its Canadian counterpart.

The Colombian peso had yet to trade against the dollar, but had rallied 3.4 per cent over the previous three sessions.

On Sunday, Trump threatened Colombia with tariffs and sanctions to punish it for refusing to accept military flights carrying deportees, but Colombia later said it would accept the military aircraft and the US sanctions threat was put on hold.

The euro eased 0.1 per cent to $1.0481.

Sterling was little changed at $1.2470.

The yen rose 0.8 per cent to 154.72 per dollar.

"As a trend, Trump is taking a more realistic, less aggressive stance on tariffs," Nomura strategist Naka Matsuzawa said.

"Bottom line: Trump doesn't want big tariffs because he's worried about inflation," he said.

"The dollar will be overall weaker."

The volatility across asset classes kicks off a crucial week for markets that will see the Federal Reserve and European Central Bank - among others - set monetary policy.

At the same time, many Asian bourses have extended holidays this week for the Lunar New Year.

Among them, South Korea and Taiwan were already closed on Monday.

Markets in mainland China are shut from Tuesday and do not reopen until February 5.

Australia was closed on Monday for Australia Day.

Meanwhile, crude oil prices rose slightly with Brent crude futures up 0.3 per cent to $78.75 a barrel, while US West Texas Intermediate crude gained 0.2 per cent to $74.80 a barrel.

Gold sank 0.3 per cent to $2,764 per ounce.

Leading cryptocurrency bitcoin slumped more than 5.0 per cent to below $US100,000 for the first time in a week, and was last at $US99,210.