Risk Appetite Improves on De-escalation in US–Europe Tensions

GLOBAL MOOD: Risk-On
Drivers:  Greenland access deal, Tariff threat reversal, NATO security framework,  Resilient US Data

Global markets moved into a risk-on phase as easing geopolitical tensions lifted investor confidence. Asia-Pacific equities advanced, tracking Wall Street gains after President Donald Trump backed away from tariff threats against Europe and ruled out the use of force over Greenland. 

The de-escalation reduced fears of a transatlantic trade shock, encouraging flows into equities while the US dollar weakened and safe-haven demand eased. Mixed but resilient US macro data, including firm growth and contained inflation, reinforced the view that the Federal Reserve can stay patient on policy. Attention is now turning to the Bank of Japan’s rate decision for near-term direction

TODAY’S WATCHLIST
 - BoJ Interest Rate Decision
 - ECB President Lagarde Speech
 - India Composite, Services and Manufacturing PMI
 - Oct-Dec Earnings: Adani Green, Cipla, IndusInd Bank

THE BIG STORY
US President Donald Trump said he had secured total and permanent US access to Greenland under a framework deal with NATO, backing away from earlier tariff threats against Europe and explicitly ruling out the use of force. The shift helped defuse what had been shaping up as the most serious rupture in transatlantic relations in decades, triggering a relief rally across European equities and pushing US markets back toward record highs. NATO officials said the arrangement would require allies to strengthen Arctic security commitments amid rising strategic competition from Russia and China.

However, the agreement remains politically sensitive and short on detail. Denmark reiterated that Greenland’s sovereignty is not up for negotiation, while EU officials warned that trust in US–Europe relations has taken a hit despite the de-escalation. Greenland’s leadership welcomed the softer tone but said clarity on the scope of US access is still lacking.

Separately, Trump escalated tensions on the domestic front by filing a $5 billion lawsuit against JPMorgan Chase and CEO Jamie Dimon, accusing the bank of politically motivated “debanking”, a move that adds another layer of uncertainty for US financials already under pressure from regulatory and policy rhetoric.

Data Spotlight
Initial jobless claims in the US edged up marginally by 1,000 to 200,000 in the week ended January 17, remaining well below expectations of a rise to 212,000 and reinforcing the view of a stable labour market. Continuing claims fell by 26,000 to 1.85 million, still above post-pandemic lows but below averages seen in the second half of last year. Inflation data remained benign, with the PCE price index rising 0.2% month-on-month in November, in line with expectations. Core PCE also increased 0.2%, while annual headline PCE inflation ticked up slightly to 2.8%. Meanwhile, personal spending rose a solid 0.5% for a second consecutive month, pointing to resilient consumer demand. Separately, US GDP growth for Q3 2025 was revised up to 4.4%, the strongest pace since Q3 2023, driven by firm consumer spending, a sharp rebound in exports, and higher government outlays, partly offset by falling imports.

Takeaway: The data underscore a resilient US economy marked by steady labour conditions, easing inflation pressures, and strong growth momentum giving the Federal Reserve room to stay patient while keeping rate-cut expectations intact for later in the year.

WHAT HAPPENED OVERNIGHT

• US stocks extend rebound as tariff fears fade
  • US stocks posted a second straight day of gains as investors welcomed President Trump’s rollback of tariff threats against European allies.
  • Sentiment remained supported after Trump signalled progress toward a framework deal on Greenland, easing fears of a transatlantic trade shock.
  • Financials were uneven—Huntington Bancshares slid 6% on acquisition-related costs, while Fifth Third and Regions Financial also pulled back after recent gains.
  • Procter & Gamble jumped 2.6% on results, Intel edged higher ahead of earnings, while Abbott plunged 10% after issuing weak profit guidance.

• US Treasury yield curve mixed as geopolitical nerves ease
  • The benchmark 10-year US Treasury yields eased 0.4 bps to 4.249%.
  • Treasury yields were uneven, with shorter maturities edging higher while long-end yields slipped.
  • The 30-year yield fell 2.7 bps to 4.8427%, reflecting modest safe-haven demand.
  • Investors are bracing for volatility while awaiting clearer details on the Greenland framework deal being negotiated by President Trump with European leaders. 

• US Dollar fell as risk appetite improves
  • The US dollar index fell 0.61% to 98.29 as investors rotated out of safe havens.
  • The move followed President Trump stepping back from tariff threats against eight European countries and ruling out the use of force to seize Greenland.
  • Risk-sensitive currencies such as the euro and sterling strengthened, while demand for the safe-haven dollar eased as market jitters cooled.

• Crude oil prices slips as geopolitical risk eases
  • Brent crude prices fell 1.8% to $64.06/barrel, while WTI declined 2.1% to $59.36/barrel, both hitting one-week lows.
  • Oil eased after President Trump softened rhetoric on Greenland and Iran, reducing near-term geopolitical risk.
  • Signs of potential progress toward ending the Russia–Ukraine war added to pressure on prices by lowering perceived supply disruption risks.

Day’s Ledger

Economic Data

• Japan Inflation Rate
• India Composite, Services and Manufacturing PMI
• Euro India Composite, Services and Manufacturing PMI
• India Bank Deposit-Credit Growth Data
• India FX Reserves Data
• US Composite, Services and Manufacturing PMI

Corporate Actions

• Oct-Dec Earnings: Adani Green, Cipla, IndusInd Bank, JSW Energy, JSW Steel, Shriram Finance, Sona BLW, Atul, BPCL, Godrej Consumer,
• Advani Hotels board to consider buyback of shares
• TPI board to consider fund raising

Policy Events

• Fed Balance Sheet
• BoJ Interest Rate Decision 
• ECB President Lagarde Speech
• BoE Greene Speech

Tickers to Watch

• DLF Q3FY26 results: Profit rises 14% to ₹1,203 cr, revenue up 32%
• Syngene International Q3 net profit plunges 89%, revenue slips 3%
• IndiGo's Q3FY26 results: Net profit declines 77.6% to ₹549 crore
• Mphasis Q3 FY26 results: Net profit increases 3.5% to ₹442 crore
• Indian Bank Q3FY26 results: Net profit rises 8% to ₹3,146.88 crore
• Zee Entertainment Q3FY26 results: Net profit falls 5.4% to ₹154.8 crore
• Waaree Energies Q3 results: Net profit more than doubles to ₹1,106 crore
• Dr Reddy's gets regulatory nod to sell generic version of Ozempic in India
• ONGC acquires 50% in two JVs with Mitsui OSK for ₹40 cr to expedite ethane transport

Must Read

• Jaishankar seeks stronger India-EU partnership to stabilise global order
• US economy logged 4.4% growth in third quarter, official data shows
• Trump launches Board of Peace, says it'll work with UN on global conflicts
• Budget 2026: Exporters seek fix for inverted duty structure, lower taxes
• What Trump Said About the U.S. Economy at Davos
• Trump’s NATO Deal Would Mean US Mining and Missiles in Greenland
  
  

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

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