Asia Equites Gain in Selective Risk-On Trade Amid Global Uncertainty

GLOBAL MOOD: Cautious Risk-On
Drivers: Geo-political tensions, US Data

Markets are showing a cautious, selective risk-on tone. Asian equities edged higher, led by Japan as a weaker yen and election speculation supported stocks, while US shares softened on financial-sector pressure and earnings disappointment. Cooling US inflation reinforced expectations of a Federal Reserve pause, helping cap downside risks. However, elevated geopolitical tensions around Iran and Venezuela, firmer oil prices, and uncertainty ahead of a potential US Supreme Court ruling on tariffs are keeping risk appetite restrained.

TODAY’S WATCHLIST
 - US PPI Data
 - Oct-Dec Earnings: HDFC AMC, Infosys, Union Bank

THE BIG STORY
The US ramps up its crackdown on Venezuela's oil empire, filing court warrants to seize dozens more tankers tied to the Maduro regime, sources say, building on recent military and Coast Guard takedowns of five vessels in international waters. This escalation follows Washington's triumphant campaign that ended with US forces capturing President Nicolas Maduro on January 3, consolidating control over Venezuelan oil flows. Meanwhile, President Donald Trump ignited fresh tensions with Iran, urging protesters in a Truth Social post to "KEEP PROTESTING - TAKE OVER YOUR INSTITUTIONS!!!... HELP IS ON ITS WAY" amid the clerical rulers' brutal suppression of the largest demonstrations in years prompting Tehran to blast him for stoking destabilization and violence.

Global markets cheer a resilient economy as the World Bank's latest report upgrades 2026 GDP growth to 2.6%, up from June's forecast, with 2025 now at 2.7% and 2027 slipping to 2.7%. U.S. strength drives two-thirds of the revision, pushing American GDP to 2.2% in 2026 despite tariff frictions yet the bank cautions that growth remains too U.S.-centric and feeble to dent extreme poverty worldwide.

Data Spotlight
US housing sales showed resilience in October 2025, dipping just 0.1% month-over-month to a seasonally adjusted annualized rate of 737,000 new single-family homes—beating expectations of 715,000 and marking the highest level over two years after a 3.8% September surge. Meanwhile, December 2025 inflation data painted a cooling picture: headline CPI rose 0.3% month-over-month, matching forecasts, while the annual rate held steady at 2.7%. Energy prices eased sharply to 2.3% annual growth, thanks to falling gasoline (3.4%) despite hotter natural gas (10.8%).

Core inflation trends reinforced the slowdown, with monthly CPI up 0.2% (below the expected 0.3%) and the annual rate at 2.6%, the lowest since March 2021 and under the 2.7% forecast. Shelter costs climbed 0.4%, and food prices rose 0.7%, split evenly between at- home and away-from-home eating. Note that October and November CPI data remain unavailable due to the US government shutdown, with the last monthly figures from September.

Takeaway:
US inflation cooled to multi-year lows in core measures amid easing energy pressures, while housing sales held firm above expectations. These trends signal a stable economic backdrop, potentially supporting steady Fed policy into 2026.

WHAT HAPPENED OVERNIGHT

• US stocks slide as credit-card cap hits financials
  • Bank and card stocks fell after JPMorgan executives warned President Trump’s proposed 10% cap on credit-card rates could hurt both lenders and consumers.
  • Visa dropped 4.5%, Mastercard fell 3.8%, while JPMorgan Chase slid 4.2% despite posting better-than-expected profits.
  • The financial sector led declines, weighing on the S&P 500.
  • Losses were partly cushioned after December inflation data came in as expected, keeping hopes of Fed rate cuts this year intact.

• US Treasury yields ease after inflation data
  • The benchmark 10-year US Treasury yield slipped to around 4.17%, easing from session highs but remaining close to a four-month peak.
  • December data showed core inflation unexpectedly unchanged, while headline inflation held steady at 2.7%, reinforcing expectations that the Federal Reserve still has room to cut rates later this year.
  • Firmer core services inflation continues to back concerns among hawkish FOMC members about sticky price pressures.

• US Dollar eases as softer core inflation revives rate-cut bets
  • The dollar index hovered around 99, retreating modestly as investors priced in a higher probability of Federal Reserve rate cuts later this year.
  • Core CPI rose just 0.2% MoM in December, below expectations, while annual core inflation held at 2.6%, matching a four-year low.
  • The softer inflation print reinforced views that price pressures are gradually cooling, giving the Fed room to ease policy.

• Crude oil prices jump on Iran supply risk
  • Brent crude prices climbed 2.5% to $65.47 per barrel, while WTI rose 2.8% to $61.15.
  • Fears of disruptions to Iranian crude exports lifted prices, outweighing prospects of higher Venezuelan supply.
  • Escalating Middle East risks reintroduced a geopolitical risk premium into oil markets.

Day’s Ledger
Economic Data

• US Monthly Budget Statement
• US PPI Data 
• India WPI Data

Corporate Actions

• Oct-Dec Earnings: HDFC AMC, Indian Overseas Bank, MRPL, Network18, Infosys, Union Bank
• Mohite Industries to consider preference share issue
• Sun Pharma Advanced to consider fund raising

Policy Events

• BoE Taylor Speech
• BoE Ramsden Speech
• ECB Guindos Speech 
• US Fed Barkin Speech
• US Fed Kashkari Speech

Tickers to Watch

• USK Capital acquires US-based snacking brand Go Raw
• Polygon Labs set to acquire two crypto firms for over $250 million
• Tata Motors ramps up capacity amid strong demand for Sierra, Punch
• TVS SCS wins Daimler contract for end-to-end in plant warehouse management
• L&T wins order worth up to ₹25 billion for cable-stayed bridge in West Bengal 
• HCLTech expects acquisitions to add nearly 1.5% to revenue next fiscal
• Ducati India plans 10 new model launches in 2026, price reveal soon
• Indofast Energy to install 23 battery swapping stations on Mumbai Metro 3
• CCI clears ChrysCapital's proposal to acquire stake in Nash Industries

Must Read

• Linking credit to health protection not charity but self-development: CEA
• Financial activities on non-financial platforms pose challenges: RBI DG
• Standard Chartered Bank won't push standalone credit cards going forward
• World Bank upgrades India's economic growth forecast to 6.5% for FY27
• US tariff on Iran trade partners unlikely to impact India: Govt
• US inflation eases in December as core prices show slowdown
• Govt looks to expand UPI's global footprint, eyes East Asia: DFS secy

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

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