Asian Markets Retreat as AI Jitters Trigger Risk-Off Shift

GLOBAL MOOD: Cautiously Risk Off
Drivers: Gaza stabilisation framework launch, US–Taiwan tariff deal

Asian equities pulled back from record levels on Friday, tracking a sharp tech-led selloff on Wall Street as renewed fears over artificial intelligence disruption rattled investor confidence. The Nasdaq slid 2% overnight, dragging regional markets lower and triggering a rotation into safe-haven assets.

US Treasury yields fell to two-month lows as investors sought safety, underscoring a clear risk-off tone. Concerns that new AI tools could erode margins across software, hardware and services sectors weighed heavily on sentiment. Oil prices also declined on softer demand signals, reinforcing growth worries. Attention now turns to US inflation data, with markets largely pushing rate-cut expectations to mid-year, though sticky price pressures could challenge that view.

TODAY’S WATCHLIST
 - US CPI Data
 - ECB Guindos Speech
 - Russia Interest Rate Decision

THE BIG STORY
President Donald Trump is set to announce a multi-billion-dollar reconstruction plan for Gaza at the inaugural meeting of his UN-backed Board of Peace on February 19 in Washington, according to senior US officials. The plan is expected to outline the creation of a UN-authorized stabilisation force for the enclave, with delegations from at least 20 countries, including several heads of state, attending. The initiative follows a UN Security Council resolution endorsing the framework and marks a formal escalation of US diplomatic involvement in post-conflict governance.

Separately, the Trump administration finalised a reciprocal trade agreement with Taiwan, confirming a 15% US tariff rate on Taiwanese imports while securing substantial commitments for increased US exports. Taiwan agreed to boost purchases of US liquefied natural gas, crude oil, aircraft, power equipment and industrial machinery through 2029, reinforcing bilateral supply chains and placing Taiwan on equal tariff footing with regional peers such as South Korea and Japan.

Data Spotlight 
US initial jobless claims edged down by 5,000 to 227,000 in early February, slightly above expectations and hovering near recent highs. Continuing claims rose by 21,000 to 1.862 million, reflecting ongoing weather-related disruptions rather than a structural deterioration in employment. Claims from federal employees also ticked higher amid continued scrutiny over the government shutdown.

Meanwhile, existing home sales plunged 8.4% in January to an annualised pace of 3.91 million, sharply below forecasts and marking the steepest decline in nearly four years after December’s three-year high. The drop underscores renewed fragility in the housing sector as affordability pressures and elevated mortgage rates weigh on demand.

Takeaway: US Labour conditions remain broadly stable despite temporary storm-related distortions, but housing has turned sharply weaker, signalling uneven momentum across the US economy.

WHAT HAPPENED OVERNIGHT

• US Stocks tech rout deepens, Nasdaq slides 2%
  • Nasdaq -2%, S&P 500 -1%+, Dow -1%+ as tech-heavy selling intensified.
  • Investors reduced exposure to AI-sensitive names amid disruption concerns.
  • Markets digested softer jobless claims data and positioned ahead of January CPI.
  • Cisco -12.3% on margin miss, biggest drop since May 2022.
  • Equinix +10.4% on strong AI-linked revenue outlook.
  • PC makers weak after Lenovo shipment warning: HP -4.5%, Dell -9%.

• US Treasury yields drops to two-month low amid risk aversion
  • The benchmark US 10-year Treasury yields fell to 4.11%, its lowest level in over two months, as investors rotated out of risk assets following another sharp pullback in AI stocks and precious metals.
  • The move reflected a broader flight to safety, with Treasuries benefiting from equity and speculative positioning unwinds.
  • Markets are focused on upcoming CPI data, expected to show moderating inflation that could reopen the path for Fed easing after January’s pause.
    
    
• US Dollar Index steady as labour strength offsets yen gains
  • The US dollar index was little changed at 96.95–97, up 0.04%, stabilising after recent volatility.
  • The euro slipped marginally to $1.1866, while the dollar weakened 0.23% against the yen to 152.91.
  • The greenback drew support from stronger-than-expected US labour data, with January nonfarm payrolls rising 130,000 and unemployment falling to 4.3%, tempering expectations of near-term Fed rate cuts.
  • However, gains were capped by continued yen strength, as investors grew more confident that Japan’s new government will pursue fiscal discipline and longer-term financial stability.
    
    
• Crude oil prices slides as demand concerns outweigh geopolitical premium
  • Brent crude prices fell 2.71% to $67.52/barrel, while WTI dropped 2.77% to $62.84/barrel.
  • Retreat in Middle East risk premium as conflict fears ease.
  • Signs of softer global demand.
  • Expectations of higher supply adding to downside pressure. 

Day’s Ledger

Economic Data

• India Bank Loan-Deposit Growth Data
• India Foreign Exchange Reserves
• US CPI Data

Corporate Actions

• Oct-Dec Earnings: Alkem Laboratories, BASF India, Fortis Healthcare, GMR Airports, Gujarat Mineral, Info Edge, Inox Wind, Ipca Laboratories, IRB Infrastructure, ITI, KFin Technologies, Narayana Hrudayalaya, NBCC (India), Torrent Pharmaceuticals, Vijaya Diagnostic
• AVI Polymers board to consider rights share issue
  
• HUDCO board to consider fund raising

Policy Events

BoJ Tamura Speech

• ECB Guindos Speech
• Russia Interest Rate Decision

Tickers to Watch

• Wipro to hike salaries from March 1, bringing much-needed relief to staff
• Dabur opens first South India manufacturing plant, to invest ₹4 billion
• Mahindra expands Chennai research valley with ₹1.96 billion investment
• M&M sees green shoots in US tractor mkt as tariffs ease after trade talks
• Ashok Leyland likely to revamp EU and UK export strategy post FTAs
• US LNG imports hinge on pricing: Petronet LNG CEO Akshay Kumar Singh
• Ireda to seek shareholders' approval to raise ₹29.94 billion via equity
• Hindalco Q3FY26 results: PAT falls 45% to ₹20.49 billion on Oswego hit
• Coal India Q3 FY26: Net profit drops 16% to ₹71.57 billion on lower sales
• Welspun Q3FY26 profit nearly wiped out due to US tariff slowdown
• HUL Q3 net profit more than doubles to ₹66.07 billion on demerger gain

 

Must Read

• RBI's proposed mis-selling norms may hit credit life business of insurers
• Sebi to review NSDL root-cause report on tech glitch: Tuhin Kanta Pandey
• Sebi mulls measures to cut regulatory costs, study market impact
• Economic self-reliance core to govt policy: FM Nirmala Sitharaman
• Over 65% ECBs worth $18 billion routed via GIFT-IFSC in FY26 so far
• NSE appoints Rothschild & Co as independent adviser for IPO process
• Home Sales in January Posted Biggest Monthly Decline in Nearly Four Years 

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day

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