Markets Tilt Risk-Off as Tariff Threats and Geopolitics Resurface

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White House

By Richard Fargose

Richard is an independent financial journalist who tracks financial markets and macroeconomic developments

January 27, 2026 at 1:46 AM IST

GLOBAL MOOD: Risk-Off
Drivers: UK–China reset, US tariff escalation, Greenland tensions, Iran standoff

Global markets are leaning risk-off, weighed down by renewed trade and geopolitical uncertainty despite pockets of supportive data. Asia opened mixed, with South Korean equities under sharp pressure after President Donald Trump announced a tariff hike on South Korean imports to 25%, hitting auto stocks hard and reviving fears of broader protectionist spillovers.

Geopolitical risks remain elevated as Washington keeps up pressure on Iran and signals possible military escalation, while political uncertainty in the US—around a potential government shutdown and speculation over Federal Reserve leadership—has driven investors toward caution.

Softer US Treasury yields and a weaker dollar reflect defensive positioning, even as US activity data point to improving growth momentum.

TODAY’S WATCHLIST

FOMC’s Two-Day Policy Meeting Begins
ECB President Lagarde Speech
Oct-Dec Earnings: Asian Paints, Vodafone Idea

THE BIG STORY
UK Prime Minister Keir Starmer is set to travel to China today, marking the first visit by a British leader in eight years, as London seeks to reset relations with the world’s second-largest economy and reduce strategic reliance on an increasingly unpredictable United States. Accompanied by senior ministers and business leaders, Starmer will hold talks in Beijing before travelling to Shanghai and onward to Japan, underscoring a broader effort to rebalance the UK’s foreign and economic policy amid shifting global power dynamics. The visit comes at a sensitive moment in transatlantic relations, with strains between Britain and the US intensifying after Donald Trump renewed threats over Greenland and escalated trade pressure on allies.

On Monday, Trump announced a hike in tariffs on South Korean imports to 25%, targeting autos, lumber and pharmaceuticals, and criticised Seoul’s legislature for failing to finalise a trade deal with Washington.

Geopolitical risk remains elevated elsewhere. The US signalled it is “open for business” if Iran seeks talks, even as Washington continues to pressure Tehran over its crackdown on protesters. Trump also warned that a US naval armada was moving toward Iran, reiterating threats of action if killings continue or nuclear activity resumes.

Data Spotlight
US durable goods orders saw a strong rebound in November, climbing 5.3% month-over-month after October’s downturn and outperforming expectations. This was largely driven by a remarkable 14.7% increase in transportation equipment, with civilian aircraft bookings soaring by 97.6%. The improvement was not limited to transportation, as orders excluding transport rose by 0.5%, and non-defense capital goods excluding aircraft often used as an indicator of business investment increased by 0.7%. These figures suggest stronger underlying spending.

Other activity indicators also showed signs of stabilisation. The Chicago Fed National Activity Index moved up to -0.04 from -0.42, mainly due to gains in production and employment components. This points to a recovery in growth following October’s softer performance.

Takeaway: US activity data point to a re-acceleration in growth late in 2025, with a sharp rebound in durable goods and improving broad activity measures suggesting business investment and production are stabilising after earlier weakness.

WHAT HAPPENED OVERNIGHT

US stocks gains as markets brace for Fed, earnings, political risk
- US stocks Indexes ended higher as investors positioned ahead of a heavy earnings and policy week.
- Apple was up 3%, Meta rose 2.1%, Microsoft gained 0.9% ahead of key earnings, communication services also firm.
- Tesla fell 3.1%, weighing on the consumer discretionary sector.
- Attention centered on Wednesday’s FOMC decision, amid speculation President Trump could name a new Fed Chair as soon as this week.
- Sentiment tempered by renewed US government shutdown risk after Democrats threatened to block a $1.2 trillion funding bill tied to Homeland Security spending.
US Treasury yield soften as shutdown risk and Fed focus intensify
- The benchmark 10-year US Treasury yields eased below 4.22%, reaching their lowest level in nearly two weeks.
- Investors grew cautious amid renewed threats of a government shutdown after Democratic leaders vowed to block a $1.2 trillion funding package that included extra Homeland Security allocations.
- Recent shootings involving federal immigration agents in Minnesota, including a fatal incident with Border Patrol officers, have caused local unrest and calls for federal accountability, contributing to policy uncertainty and market concerns.
- Traders are eyeing the Federal Reserve’s first monetary policy decision of 2026, this week, with a widely anticipated hold but keen attention to updated economic outlooks and guidance on future rate actions.
US Dollar slides to four-month low amid policy and confidence concerns
- The US dollar index fell toward 97, its lowest level in over four months.
- Last week’s 1.9% weekly fall marked the sharpest decline since April.
- Investor confidence dented by policy uncertainty and renewed debate over a weaker-dollar bias in Washington.
Crude oil prices ease after prior surge as storm risks offset Iran tensions
- Brent crude prices slipped 0.4% to $65.59/barrel, paring gains after last session’s 2%+ rally, while WTI fell 0.7% to $60.63/barrel, tracking broader consolidation.
- Markets assessed potential output disruptions from winter storms in US shale regions.
- US–Iran tensions remained a background support, but no fresh escalation emerged.

Day’s Ledger

Economic Data

US Durable Goods Sales Data
US Money Supply Data

Corporate Actions

Oct-Dec Earnings: Asian Paints, Vodafone Idea, CG Power, Marico, Motilal Oswal, TATA Consumer, Vishal Mega,
Active Clothing board to consider warrants issue

Policy Events

FOMC’s Two-Day Policy Meeting Begins
ECB President Lagarde Speech
BoJ Monetary Policy Meeting Minutes

Tickers to Watch

DLF makes a ₹20 billion bet on senior living in Gurugram this quarter
Sun Pharma, Cipla recall products in US over manufacturing issues: USFDA
Too early to say small car demand will sustain GST cuts: Ceat MD & CEO
Embassy Developments pre-sales to jump 2.5-fold to ₹50 billion
Adani Group, Embraer to set up commercial aircraft assembly line in India
PVR Inox sells premium snack brand 4700BC to Marico for ₹2.27 billion
Nalco eyes 200-300 MW green power with battery storage for clean aluminium
Tata Technologies expects 'very strong' FY26 despite global uncertainties
Chennai Petroleum Corp reports ₹10.02 billion Q3 profit on strong margins
Axis Bank Q3 results: Net profit rises 3% to ₹64.90 billion, NII at ₹142.87 billion

Must Read

See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

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