Asian Markets Mixed as Growth Optimism Counters Geopolitical Anxiety

GLOBAL MOOD: Cautious Risk on
Drivers: Renewed US Military Warnings, Persistent Inflation Concerns

Asia-Pacific markets were a mixed, reflecting a cautious risk-on sentiment. Investors continued to balance optimism around technology-led growth and artificial intelligence investments against lingering uncertainty surrounding US-Iran negotiations and the broader geopolitical backdrop.

The strongest boost to sentiment came from the technology sector. South Korea’s Kospi gained over 1%, supported by a record high in Samsung Electronics, while Japan’s market remained resilient despite modest moves.

However, risk appetite remained restrained. President Donald Trump’s comments that he was in “no hurry” to finalise a deal with Iran highlighted the fragile nature of ongoing negotiations. US officials reiterated that military action remains an option if talks fail, keeping concerns alive over energy supply disruptions and renewed volatility in oil markets.

At the same time, persistent inflation concerns linked to elevated energy prices continue to cloud the outlook for global interest rates. Central banks remain cautious, with markets increasingly sensitive to any developments that could delay rate cuts.

Overall, investors are leaning toward risk assets on expectations that diplomacy will ultimately prevail and AI-driven growth will support corporate earnings, but geopolitical tensions and inflation risks are preventing a full-fledged risk-on rally.

THE BIG STORY
The United States warned that it remained prepared to resume military strikes against Iran if ongoing negotiations failed to deliver a workable agreement, highlighting the fragile nature of the current ceasefire discussions. Speaking at the Shangri-La Dialogue in Singapore, US Defense Secretary Pete Hegseth said Washington retained sufficient military capability and stockpiles to restart operations if required. His comments underscored continuing uncertainty despite recent progress toward extending the ceasefire and reopening shipping routes through the Strait of Hormuz.

Hegseth also sought to reassure Indo-Pacific allies that the US remained committed to the Asia-Pacific region despite ongoing conflict in West Asia. Regional defence officials nevertheless acknowledged growing concerns about balancing security priorities amid rising geopolitical tensions and China’s expanding military influence. Countries across the Indo-Pacific signalled plans to accelerate defence spending and strengthen regional security cooperation beyond traditional US-led frameworks.

At the same time, inflation concerns linked to the Iran conflict continued to dominate economic discussions globally. Rising oil prices and supply disruptions have forced central banks to maintain restrictive policy stances or postpone expected rate cuts. IMF officials warned that elevated inflation had made monetary policymaking increasingly difficult, with policymakers facing pressure to prevent temporary energy shocks from becoming more deeply embedded in broader inflation trends.

The combination of geopolitical uncertainty, military posturing and persistent inflation pressures reinforced expectations that global markets would remain highly sensitive to developments surrounding Iran, energy supply stability and central bank policy direction.

Data Spotlight
The US goods trade deficit narrowed to $82.4 billion in April 2026 from $85.3 billion in March, supported by a strong rebound in exports. Overseas shipments surged 4% to a record $219.7 billion, driven by robust demand for capital goods, industrial supplies and consumer products. Capital goods exports rose 7.5%, while consumer goods exports increased 7.8%, highlighting continued resilience in global demand for US manufactured products. Imports also increased, though at a slower 1.9% pace, with gains in capital goods partly offset by declines in industrial supplies, vehicles and consumer goods imports. The cumulative goods deficit for the January–April period narrowed sharply compared with the same period last year, signalling an improving external trade position.

Meanwhile, US wholesale inventories rose 0.5% month-on-month in April, marking a third consecutive monthly increase, although the pace slowed from March’s strong build-up. Durable goods inventories continued to rise steadily, while nondurable inventories declined modestly after a sharp increase in the previous month. The continued inventory accumulation suggested businesses were still maintaining relatively stable supply chains and preparing for sustained demand conditions.

Takeaway:
Strong export growth and a narrowing trade deficit pointed to continued resilience in external demand for US goods, while steady inventory accumulation suggested businesses remained cautiously optimistic despite slowing economic momentum and persistent geopolitical uncertainty.

WHAT HAPPENED OVERNIGHT

• US stocks hit record highs as technology shares rallied on strong earnings
  • Wall Street indices closed at fresh record highs and posted strong weekly and monthly gains.
  • Dow Jones rose 0.72%, S&P 500 gained 0.22% and Nasdaq advanced 0.21%.
  • Investor sentiment remained supported by strong technology earnings and continued AI optimism.
  • Markets also monitored developments around a potential US–Iran agreement, with Donald Trump expected to decide on the deal framework.
  • Dell Technologies surged 32.8% after raising full-year profit and revenue forecasts.
  • Technology and semiconductor shares led gains, with the tech sector rising 1.87%.
  • Hewlett Packard Enterprise and Super Micro Computer gained 12.6% and 11.6%, respectively.
  • Microsoft climbed 5.4%, while software services stocks recovered losses linked to earlier AI disruption concerns.
  • Weakness in communication services and consumer staples limited broader market gains.
  • Alphabet fell 2.5%, while Costco and Walmart declined 3.9% and 2.6%, respectively.

• US Treasury yields held near three-week lows as inflation concerns eased
  • The US 10-year Treasury yield hovered around 4.45%, remaining close to its lowest level in about three weeks.
  • Yields nevertheless remained around 7 basis points higher for the month amid lingering inflation concerns.
  • Investors continued monitoring developments surrounding a potential US–Iran agreement.
  • Reports suggested Washington and Tehran had reached a preliminary understanding to extend the ceasefire by 60 days and begin discussions on Iran’s nuclear programme.
  • The proposed agreement still awaited formal approval from Donald Trump.
  • Declining oil prices helped ease fears of prolonged energy-driven inflation pressures.
  • Recent PCE inflation data showed softer-than-expected monthly readings for both headline and core inflation.
  • Annual inflation nevertheless remained well above the Federal Reserve’s target, with headline PCE at 3.8% and core PCE at 3.3%.
  • Markets broadly expected the Fed to keep rates unchanged through year-end.

• US Dollar held steady as markets assessed ceasefire progress and inflation data
  • The US dollar index traded little changed around 99, remaining close to two-week lows.
  • The greenback was nevertheless on track to end May around 1% higher.
  • Investors continued monitoring developments surrounding a possible US–Iran agreement.
  • Reports indicated Washington and Tehran had reached a preliminary understanding to extend the ceasefire by 60 days and begin discussions on Iran’s nuclear programme.
  • The proposed agreement still awaited formal approval from Donald Trump.
  • Falling oil prices helped reduce concerns over prolonged energy-driven inflation pressures.
  • Recent PCE inflation data showed softer-than-expected monthly increases in both headlines and core inflation.
  • Annual headline and core PCE inflation nevertheless remained elevated at 3.8% and 3.3%, respectively, above the Federal Reserve’s target.

• Oil prices declined sharply as ceasefire expectations eased supply concerns
  • Brent crude for  July delivery fell 1.8% to settle at $92.05 per barrel.
  • WTI crude declined 1.7% to close at $87.36 per barrel.
  • Oil markets recorded their steepest weekly decline since early April.
  • Investors increasingly expected the US, Israel and Iran to reach a ceasefire agreement.
  • Hopes for a diplomatic resolution reduced concerns over prolonged supply disruptions in the Strait of Hormuz.
  • Easing geopolitical risk sentiment continued to pressure energy prices lower after weeks of volatility. 

Day’s Ledger* 

Economic Data

• China Caixin May Manufacturing PMI
  
• India May S&P Global Manufacturing PMI
  
• India April Industrial Production Index
  
• US S&P May Global Manufacturing PMI
  
• US ISM May Manufacturing PMI

Corporate Actions

• Libas Consumer Products to detail earnings

Policy

• Bank of Canada Senior Deputy Governor Rogers Speaks
  
• US Fed Waller Speaks

Tickers to Watch

• CONCORD BIOTECH Jan-Mar net profit fell 36.8% to ₹0.9 billion, with revenue down 24.1% to ₹3.3 billion; board recommended a dividend of ₹7.55 per share.
• CYIENT signed a definitive agreement to acquire AI-native engineering firm Tao Digital Solutions for an enterprise value of $218 million, with closure expected by Q2 FY27.
• GLENMARK PHARMA Jan-Mar profit surged to ₹3.0 billion from ₹0.05 billion, with revenue rising 15.8% to ₹37.7 billion and EBITDA margin expanding to 20.2%.
• INOX WIND Jan-Mar net profit declined 51.1% to ₹0.9 billion, while revenue fell 2.4% to ₹12.4 billion and margins narrowed.
• INTERGLOBE AVIATION (INDIGO) reported a Jan-Mar loss of ₹25.4 billion versus a profit of ₹30.7 billion a year ago, while revenue rose 1.3% to ₹224.4 billion.
• LUMAX AUTO TECHNOLOGIES Jan-Mar net profit increased 51% to ₹0.9 billion, with revenue up 25.1% to ₹14.2 billion and margins improving to 14.3%.
• LUPIN received US FDA approval for Sodium Sulfate, Magnesium Sulfate and Potassium Chloride tablets used for colon cleansing before colonoscopy procedures.
• NMDC Jan-Mar net profit rose 36% to ₹20.2 billion on a 61.9% jump in revenue to ₹113.4 billion, though EBITDA margins contracted.
• OLECTRA GREENTECH Jan-Mar net profit jumped to ₹0.6 billion from ₹0.2 billion, while revenue grew 43.6% to ₹6.4 billion and EBITDA margins expanded to 15.5%.
• PNC INFRATECH secured an EPC work order worth ₹3.0 billion from the Airports Authority of India for an airport infrastructure project.
• WOCKHARDT received US FDA approval for Zaynich (cefepime and zidebactam), a novel antibiotic for complicated urinary tract infections in adults.

Must Read

• India’s Monsoon Risk is Really an Inflation and Rural Demand Test
• The Big Picture is the Loss of US Supremacy in West Asia
• What Rubio’s India Visit Really Signals
• The Costs of Governing India Through Election Cycles
• Tariffs, Trade Wars and the Climate Cost of Economic Fragmentation
• India's Problem Is Not the Storm; It is the Lull Before
• Will RBI Bite the Bullet or Kick the Can Down the Road, Again?
  
• Cockroaches of the world have united
  
• Amid rising inflation, RBI cannot neglect growth
  
• The End of Nine-to-Five
• ‘Youngsters will end up following the cockroach’: V-P Radhakrishnan’s sharp warning to media 

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

The RBI’s June decision is not just about hike or hold.

Growth is slowing, inflation risks are rising and the rupee has weakened. Markets are pricing in tighter policy.

But a June rate hike may not be the right first move.

Radhika Piplani writes, current inflation pressure is largely imported and supply-driven. A repo hike cannot reprice crude oil, but it can hurt domestic growth.

June may therefore be a credibility event, not a rate event.

The RBI could hold rates, sound more hawkish, manage liquidity and use external-sector tools to reduce rupee volatility.

Credibility does not always require the bluntest instrument. Sometimes, calibration is the stronger signal.

(*Compiled from various media sources)