GLOBAL MARKETS-US tech stocks, dollar rebound after DeepSeek-triggered selloff

Updates to afternoon U.S. trading

By Lawrence Delevingne and Alun John

BOSTON/LONDON, Jan 28 (Reuters) - Global technology stocks regained some ground on Tuesday a day after a low-cost Chinese AI model rattled markets, while traders rotated back into the dollar from safe-haven currencies.

The tech rebound boosted Wall Street's main stock indices, with the S&P 500 .SPX up about 0.75% and the Dow Jones Industrial Average .DJI about 0.3% higher. The tech-heavy Nasdaq .IXIC added about 1.7%. .N

Nasdaq shares tumbled on Monday as chip giant Nvidia NVDA.O dived 17%, losing nearly $593 billion of its value in the biggest one-day market capitalization loss in history.

Behind the rout was the emergence of a low-cost Chinese artificial intelligence model, DeepSeek, which made investors question the dominance of AI bellwethers and their suppliers.

Nvidia shares gained 6% on Tuesday, with Apple APPL.O up nearly 4%.

"The market's initial response has been ‘sell first, understand later,'" said Stuart Dunbar, a partner at investment firm Baillie Gifford.

"Short-term news flow and price moves don’t invalidate the potentially profound impact AI will have on the world. The advent of a much cheaper lightbulb didn’t signal bad news for lightbulb manufacturers or electricity companies."

Investors' reassessment of developments in the AI sector 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.

Tuesday's earnings highlights included Boeing BA.N, whose shares rose about 4% even after the plane maker reported its biggest annual loss since 2020.

Shares in General Motors meanwhile fell more than 9% as investors weighed the threat of tariffs even as the carmaker posted results and an earnings forecast ahead of expectations.

European tech stocks stabilized on Tuesday .SX8P and the broad STOXX 600 .STOXX share benchmark hit a new intraday high, a sign of how strongly shares have been performing in recent weeks. .EU

Japan's Nikkei share average fell more than 1% on Tuesday as heavyweight chip-related stocks tracked an overnight drop in the Nasdaq index, but gains in bank shares helped the Topix trim early losses. .T

DON'T FORGET TARIFFS

Trade tensions over President Donald Trump's tariffs and other policies remained in the mix, supporting the dollar and driving investors back out of Treasuries.

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.

Trump later said that he wanted "much bigger" tariffs than 2.5% and was considering targeted duties on products such as steel, copper and semiconductors.

At the same time, U.S. consumer confidence weakened for a second straight month in January amid renewed concerns about the labor market and inflation.

The euro EUR=EBS was down about 0.6%, while safe-haven currencies, which had appreciated Monday, gave back their gains. The dollar was last up 0.7% on the Japanese yen JPY=EBS and up 0.3% on the Swiss franc. CHF=EBS FRX/

Similarly, 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 3.9 basis points higher at 4.567%. US/

Of note in European rates markets was the spread between French and German 10-year yields, which blew out last year on French political uncertainty. The spread narrowed to 72 bps, FR10DE10=RR its tightest since mid November, as investors hope the current government may be able to pass a budget. GVD/EUR

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

Oil prices held on Tuesday near multi-week lows as disruption to Libyan oil loadings at major ports offset fears of weaker demand linked to soft economic data from China and rising temperatures elsewhere.

Gold XAU=, which had slipped as investors liquidated bullion to cover losses, added 0.6% to $2,757 an ounce.