GLOBAL MARKETS-Share markets steady in nervy trading after DeepSeek selloff

By Tom Westbrook and Alun John

SINGAPORE/LONDON, Jan 28 (Reuters) - U.S. stock futures and European shares steadied on Tuesday, after the previous day's dramatic, tech-led selloff, and traders walked back some moves to safe-haven government bonds, though investors across asset classes remained jittery.

Chipmaker Nvidia NVDA.O dived 17% on Monday, wiping off nearly $593 billion in the biggest one-day market capitalisation loss in history, and the Philadelphia semiconductor index .SOX, down 9.2%, suffered its biggest loss since March 2020,

Behind the rout was the emergence of a low-cost Chinese artificial intelligence model, DeepSeek, that made investors question the dominance of AI bellwethers and their suppliers, which have sent shares of tech companies and chip firms soaring.

In a sign that Tuesday might be a little calmer, Nvidia rose around 5% in premarket trading, Nasdaq futures were 0.5% higher, and European tech stocks .SX8P gained 1%.

But it was not all calm, as selling pressure remained in Japan for a second day with Nvidia supplier Advantest 6857.T now down 19% in two days, and investors and strategists continued to grapple with what it all meant. .T

"When you look at valuations, we all know that they are expensive, especially tech valuations, but they are expensive for a reason, namely earnings growth," said Yvan Mamalet, senior economist at Kleinwort Hambros.

"The news yesterday was saying maybe the earnings growth will not be as good as what the market was expecting," he said.

"The point is AI is a massive disruption, and, in the past, when you had disruption, you always had new players coming in and trying to challenge the major players. That's the game all these companies are in," Mamalet added.

The news will also heighten investor interest in this week's earnings at Microsoft MSFT.O, Tesla TSLA.O and Meta META.O. Executives can expect to be asked whether they still plan to spend so much on computing power.

In a further sign of how elevated valuations are, the stabilisation in the broad European STOXX 600 benchmark helped it up 0.7% to a new record intraday high. .STOXX .EU

U.S. Treasuries, which rallied on Monday as part of the risk-off move, reversed course and benchmark 10 year yields US10YT=RR were last four basis points higher at 4.57%. US/

Of note in European rates markets was that the spread between French and German 10-year yields, which blew out last year on French political uncertainty, narrowed to 72 bps, its tightest since mid November, as investors hope the current government may be able to pass a budget. GVD/EUR

DON'T FORGET TARIFFS

While DeepSeek gave investors something to think about other than President Donald Trump's tariff and other policies, trade tensions remained in the mix, and also supported the dollar.

New U.S. Treasury Secretary Scott Bessent is pushing for a gradual rise in universal tariffs starting from 2.5%, and potentially up to 20%, the Financial Times reported, and Trump later said that he wants “much bigger” tariffs than 2.5% and is considering targeted duties on products like steel, copper and semiconductors.

The euro EUR=EBS was down 0.6% at $1.042, while safe-haven currencies, which had appreciated Monday, gave back their gains. The dollar was last up 0.6% on the Japanese yen at 155.38, JPY=EBS and up 0.5% on the Swiss franc at 0.9062. CHF=EBS

There are also central bank meetings to grapple with. The Federal Reserve is expected to keep rates steady at its meeting which concludes Wednesday, and the European Central Bank is expected to cut rates by 25 bps on Thursday.

Oil prices recovered some of Monday's losses, with benchmark Brent crude futures LCOc1 up 0.8% at $77.75 a barrel and gold XAU=, which had slipped as investors liquidated bullion to cover losses, hovered around $2,742 an ounce.