Asia Edges Higher Amid AI Volatility and Easing Oil Prices

GLOBAL MOOD: Risk On
Drivers: Iran–US nuclear progress, Ukraine peace talks amid escalation, Fed signals cautious hold

Asian markets posted modest gains in light Lunar New Year trading, reflecting a tentative risk-on tone after a volatile Wall Street session. Japan and Australia led advances, lifting the regional benchmark following three days of declines, even as US equities finished little changed.

Sentiment remains measured. Softer US inflation and steady Treasury yields have reinforced expectations of rate cuts later this year, though Federal Reserve officials continue to signal patience. Meanwhile, easing tensions in US–Iran nuclear talks have trimmed the geopolitical premium in oil, with crude sliding to a two-week low.

Investors are also weighing ongoing AI-related volatility, particularly given Asia’s central role in global chip manufacturing. Strong Japanese export data offered a constructive counterpoint to softer US housing indicators.

TODAY’S WATCHLIST
 - Japan Balance of Trade
 - US Housing Starts Data
 - Fed Daly Speech

THE BIG STORY
The United States and Iran reached a preliminary understanding on key “guiding principles” in renewed nuclear negotiations in Geneva, marking a diplomatic step forward but stopping short of a breakthrough. Iranian Foreign Minister Abbas Araqchi said both sides agreed broadly on core principles, with Tehran expected to submit more detailed proposals within two weeks to narrow remaining gaps. Markets remain cautious, as progress does not yet imply a final agreement.

At the same time, US-brokered peace talks between Ukraine and Russia resumed in Geneva, though Russia launched fresh airstrikes on Ukraine ahead of negotiations, underscoring fragile conditions around diplomacy.

On the monetary policy front, Federal Reserve officials struck a measured tone. Governor Michael Barr said it would likely be appropriate to hold rates steady for some time, seeking clearer evidence that goods inflation is sustainably easing. Chicago Fed President Austan Goolsbee added that several rate cuts this year remain possible if inflation continues to move toward the 2% target, though recent data show uneven price pressures.

Data Spotlight 
The NAHB/Wells Fargo Housing Market Index declined to 36 in February 2026 from the previous reading of 37, falling short of expectations at 38 and reaching a five-month low. This decrease reflects softening builder sentiment, with future sales expectations dropping to 46, buyer traffic decreasing to 22, and current sales remaining steady at 41. Additionally, price reductions eased to 36% from 40%.

The NY Empire State Manufacturing Index maintained expansion at 7.1—slightly down from 7.7 and consistent with forecasts—indicating modest growth optimism despite weaker new orders (5.8 compared to 6.6) and shipments (-1 versus 16.3). Employment prospects are being closely monitored.

Japan's exports increased by 16.8% year-on-year to ¥9,187.5 billion, marking the fastest growth since November 2022 and surpassing forecasts of 12%. This performance was driven by strong Lunar New Year demand from China (+32%), other Asian markets (Hong Kong +73.1%, Vietnam +30.6%), the European Union (+29.6%), and Russia (+53.4%). However, shipments to the United States declined by 5% due to weaker exports of pharmaceutical products, machinery, and automobiles.

Takeaway:
Cautious sentiment in US housing and manufacturing stands in contrast to robust growth in Asian exports, with analysts monitoring Federal Reserve policy and international trade flows for global economic indicators.

WHAT HAPPENED OVERNIGHT

• US Stocks stabilise as tech rebounds from intraday lows
  • Major indices edged slightly higher after early weakness,
  • The S&P 500 information technology sector reversed a 1.5% intraday drop to close up 0.5%.
  • Nvidia and Apple gains offset declines in Microsoft and Oracle.
  • Financial stocks also lent support, helping stabilise broader benchmarks.
  • Markets continue to digest last week’s sharp AI-driven selloff in software, brokerages and transport names.

• US Treasury yields firm as rate-cut expectations consolidate
  • The 10-year US Treasury yield held below 4.05%, its lowest level in over two months.
  • Softer-than-expected headline inflation reinforced expectations of multiple Fed rate cuts this year.
  • Markets increasingly price a restart of policy easing in the second half of 2026.
  • Demand for duration strengthened amid renewed volatility in high-valuation equity segments.

• US Dollar Index firms as rate-cut bets pared
  • The US dollar index rose around 0.40% to 97.30, marking a second consecutive daily gain.
  • Move driven by reduced expectations for aggressive Fed easing in 2026.
  • Resilient macro data and a stabilising labour market dampened pricing for three rate cuts this year.

• Crude oil prices eases to two-week low on easing Iran tensions
  • Brent crude prices fell 1.8% to settle at $67.42/barrel, WTI crude declined 0.9% to $62.33/barrel.
  • Prices dropped around 2%, hitting a two-week low.
  • Iran’s foreign minister said Tehran and Washington agreed on key “guiding principles” for nuclear talks.
  • Hopes of de-escalation reduced geopolitical risk premium in crude markets.
  • Expectations of fewer disruptions to Iranian exports weighed on prices.

Day’s Ledger

Economic Data

• Japan Balance of Trade
• US Housing Starts Data
• UK inflation rate

Corporate Actions

• NBCC board to consider dividend
• Padam Cotton board to consider rights share issue

Policy Events

• Fed Daly Speech

Tickers to Watch

• Adani group commits $100 billion for RE-powered AI data centres
• Real challenge lies in execution of AI: Infosys chairman Nandan Nilekani
• Infosys partners with Anthropic for AI solutions with focus on agentic AI
• Dabur elevates Mohit Malhotra as global CEO, names Herjit Bhalla India CEO
• Airtel Money gets RBI clearance to operate as Type II non-deposit NBFC
• Eternal partners with OpenAI to boost AI across Zomato, Blinkit, District
• Maruti Suzuki launches its first EV with battery rental scheme

Must Read

• India shifts from growth story to trusted global partner, says PM Modi
• US tariff easing brightens outlook for Indian exporters: DFS secy Nagaraju
• Three US-sanctioned oil tankers linked to Iran likely seized by India
• AI Impact Summit: Age-based social media curbs on table, says Vaishnaw
• IBA appoints Gunveena Chadha as Secretary General
• RBI releases draft for new foreign exchange rules, seeks comments by March 10

 

---

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

Is India finally on the cusp of a private capex revival — or are the “green shoots” still fragile?

For years, public investment has carried the growth story, with government capex rising sharply while private investment lagged. There are tentative signs of improvement: stronger corporate balance sheets, healthier banks, policy rate cuts, and improved trade clarity. Yet capacity utilisation remains around 75%, below the levels that typically trigger broad-based expansion, and fresh investment is still concentrated in select sectors like renewables, electronics and defence.

Sharmila Kantha writes, Can Public Spending Finally Crowd In Private Capex?

The real question is whether demand will rise enough to justify large new capacity creation. Until utilisation moves decisively above critical thresholds, public spending is likely to remain the primary engine of growth. Crowding-in is possible. But it is not automatic.