GLOBAL MARKETS-Asia equities slide with US stock futures on China's AI push; dollar firms

Updates prices ahead of European markets open

By Kevin Buckland

TOKYO, Jan 27 (Reuters) - U.S. stock futures and Asian shares outside China slumped on Monday as investors weighed the implications of Chinese startup DeepSeek's launch of a free, open-source artificial intelligence model to rival OpenAI's ChatGPT.

Meanwhile, the dollar rose after U.S. President Donald Trump threatened Colombia with retaliatory levies and sanctions for turning away military aircraft carrying deported migrants before a last-minute deal was agreed.

U.S. Nasdaq Composite futures NQc1 tumbled 2.3% as of 0634 GMT and S&P 500 futures EScv1 sank 1.3%.

Japan's Nikkei .N225 dropped 0.9%, reversing an initial advance. New Zealand's equity benchmark .NZ50 slipped 0.2% and Singapore's Straits Times index .STI eased 0.1%.

At the same time, Hong Kong's Hang Seng .HSI rallied 1% and mainland blue chips .CSI300 added 0.1%, even after data showed a surprise contraction in manufacturing this month.

Pan-European STOXX 50 futures STXEc1 dropped 0.9%.

DeepSeek "has raised the spectre of disruption in the tech landscape, with its emergence suggesting that China can continue to make strides in the AI race despite US restrictions," Yeap Jun Rong, a strategist at IG, wrote in a note.

It "seems to instil some concerns over U.S. tech dominance", putting "tech companies' lofty valuation back under scrutiny", he said.

In currencies, the dollar advanced 0.4% against the Chinese yuan in offshore trading CNH=D3, and gained 0.4% versus the Aussie AUD=D3 and the New Zealand dollar NZD=D3, with the antipodean currencies tending to act as more liquid proxies for China's currency due to close trade ties.

The Mexican peso MXN= slumped about 0.7% and the Canadian dollar CAD=D3 eased 0.2%. The Colombian peso COP= had yet to trade against the dollar, but had rallied 3.4% over the previous three sessions.

The euro EUR=EBS eased 0.2% to $1.0461. Sterling GBP=D3 edged 0.1% lower to $1.2457. The yen JPY=EBS was little changed at 156.13 per dollar.

DOLLAR STRENGTH FLEETING

China, Mexico and Canada face a nervy wait with Trump last week earmarking Feb. 1 for additional tariffs on the United States' top trading partners.

However, Nomura strategist Naka Matsuzawa expects dollar strength on tariff worries to be fleeting.

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

"Bottom line: Trump doesn't want big tariffs because he's worried about inflation," he said. "The dollar will be overall weaker."

Trump last week soothed market concerns by saying he wanted to avoid tariffs on China, and said he could reach a trade deal.

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 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 Feb. 5. Australia was closed on Monday for Australia Day.

Meanwhile, crude oil prices slumped after Trump on Friday reiterated his call for OPEC to cut oil prices.

Brent crude futures LCOc1 dropped 0.8% to $77.85 a barrel, while U.S. West Texas Intermediate crude CLc1 lost 0.9% to $74.00 a barrel.

Gold XAU= sank 0.7% to $2,753 per ounce.

Leading cryptocurrency bitcoin BTC= slumped more than 5% to below $100,000 for the first time in a week, and was last at $99,215.