*

China startup DeepSeek's rival to ChatGPT puts tech

valuations

in question

*

President Trump has deportation spat with Colombia, dollar

dips

*

Fed, ECB meetings loom in week with many Asian bourses

shut for

Lunar New Year

(Updates with European morning trade)

By Samuel Indyk and Kevin Buckland

LONDON, Jan 27 (Reuters) -

European and Asian shares 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 dipped as broad U.S. import tariffs

remained on the back burner, even as U.S. 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%, while the blue-chip Euro STOXX

50 dropped 1.4% in early European trading.

The STOXX Europe 600 technology index fell as

much as 4.6%, its biggest one-day drop since mid-October.

Futures on the tech-heavy Nasdaq Composite in the

U.S. tumbled over 3.1% and S&P 500 futures sank 2%.

"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 ( NVDA ), which have

risen over 800% since the start of 2023, were down over 7% in

pre-market trade.

Japan's Nikkei dropped 0.9%, reversing an initial

advance. New Zealand's equity benchmark slipped 0.2% and

Singapore's Straits Times index eased 0.1%.

At the same time, Hong Kong's Hang Seng rallied 0.7%

and Chinese mainland blue chips dipped 0.4% after data

showed a surprise contraction in manufacturing this month.

DOLLAR STRENGTH FLEETING

In currency markets, the dollar dipped, as Trump has so

far refrained from implementing broad-based U.S. import tariffs,

but 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.

The dollar rose 1% against the Mexican peso on

Monday and 0.1% against its Canadian counterpart.

The Colombian peso had yet to trade against the

dollar, but had rallied 3.4% 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 U.S. sanctions threat was put on hold.

The euro eased 0.1% to $1.0481. Sterling

was little changed at $1.2470. The yen rose

0.8% 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

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

Meanwhile, crude oil prices rose slightly with Brent crude

futures up 0.3% to $78.75 a barrel, while U.S. West

Texas Intermediate crude gained 0.2% to $74.80 a barrel.

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

Leading cryptocurrency bitcoin slumped more than 5%

to below $100,000 for the first time in a week, and was last at

$99,210.