Fed Debate, Tariff Jitters and Euro Data Shape Cautious Market Sentiment

GLOBAL MOOD: Cautiously Risk-on
Drivers: Fed independence debate, Trump-Fed tensions, India-US tariff talks

Asian markets are starting the day on a cautious footing, with tariff jitters and Fed drama clouding the mood. A softer dollar, shaky US outlook, and signs of recovery in Europe add a mix of risk-on and risk-off vibes.

TODAY’S WATCHLIST
 - US PMI
 - German Buba President Nagel Speaks  
  
THE BIG STORY
US Treasury Secretary Scott Bessent emphasised that the Federal Reserve must remain independent but acknowledged it has “made a lot of mistakes,” defending President Donald Trump’s decision to seek the removal of Fed Governor Lisa Cook over alleged mortgage fraud. Speaking to Reuters, Bessent suggested the administration’s intervention may reflect frustration with the Fed’s handling of monetary policy rather than an attempt to “stack the board.” Independent central banks remain widely viewed as essential for global financial stability.

Meanwhile, Trump claimed that India has offered to cut tariffs on US goods to zero, criticising the timing and calling past US-India trade relations “one-sided.” The remarks came as Indian Prime Minister Narendra Modi attended the Shanghai Cooperation Organisation summit in China, underscoring growing geopolitical tensions amid Trump’s global tariff strategy. 

Data Spotlight
Euro zone manufacturing returned to expansion in August for the first time since mid-2022, supported by stronger domestic demand. The HCOB Eurozone Manufacturing PMI rose to 50.7, above the 50.0 growth threshold and higher than the preliminary 50.5 estimate. Greece and Spain led with PMIs of 54.5 and 54.3, while Germany’s PMI reached a 38-month high of 49.8, just below growth.

The Euro Area unemployment rate fell to 6.2% in July, matching a record low, with youth unemployment dropping to 13.9%, highlighting a resilient labour market.

Takeaway: Euro zone industrial and labour market data point to a gradual recovery, boosting optimism for growth ahead.

WHAT HAPPENED OVERNIGHT

US markets were shut on Monday for Labor Day

• Dollar hits lowest since late July ahead of jobs data
  
  • Dollar index slipped 0.15% to 97.71, touching its weakest since July 28.
  • Traders eye US labour data this week: job openings, private payrolls, and Friday’s nonfarm payrolls.
  • Markets price ~90% chance of a 25 bps Fed cut in September; ~100 bps easing by autumn 2026.

• Oil rises on weaker dollar, Russian supply risks
  
  • Weaker dollar boosted commodity demand; Chinese manufacturing PMI expansion added support.
  • Russian weekly oil shipments fell to 2.72 million bpd, a four-week low.
  • Zelenskiy vows retaliation after intensified Russian drone strikes; risk of further disruption.

Day’s Ledger

Economic Data

• Eurozone August CPI 
• US August S&P Global Manufacturing PMI 
• US July Construction Spending 
• US August ISM Manufacturing Employment 
• US August ISM Manufacturing PMI

Corporate Actions

• Earnings: JSW Cement, Orissa Minerals, All Time Plastics, Shoora Designs, Seven Hill Industries
• Himatsingka Seide to consider fund raising
• NDTV to consider rights issue
• Prajay Engineers to consider fundraising
• Trustedge Capital to consider fund raising, rights issue

Policy Events

• Bank of Japan Himino Speech
• German Buba President Nagel Speaks  
• ECB Elderson Speech
• ECB Machado Speech

Tickers to Watch

• Hero MotoCorp’s August sales rose 8% YoY with strong export momentum.
• Maruti Suzuki’s August production slipped 6% YoY to 158,202 units, led by SUV decline.
• Coal India’s August output rose 9.4% YoY while sales grew 7.6%.
• Tata Motors’ August despatch growth was limited by weak domestic PV sales.
• M&M’s August PV despatches fell for the first time since Jan 2022.
• Eicher Motors’ Royal Enfield despatches jumped 55% YoY in August.
• Eicher Motors’ CV despatches climbed 9.5% YoY in August on truck demand.
• TCS completed migration of Scottish Widows’ life and pension business to its BaNCS platform.

Must Read:

• India emerging as global hub for life sciences GCCs, says EY report
  
• India’s current account deficit narrowed to 0.2% of GDP in Q1 FY26
  
• India’s net GST kitty increases 10.7% to ₹1.67 trillion in August
  
• RIL’s growth plans, Jio listing can lead to re-rating of its stock
  
• Lagarde calls any Euro Area government collapse ‘Worrying’
  
• When Fox News Discovers India, Caste and Democracy Over Morning Coffee
  
• India’s Trade Playbook Exposed by Trump’s Tariff Shock
  
• Nominal Weakness Tells the Real Story for RBI
  
• SCO Summit: Beyond the Optics of Alignments
  
• India at the SCO: Strategic Autonomy in a Multipolar Moment

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

The Global Economy Shrugged

Michael Patra’s latest column for BasisPoint Insight:  Global growth has defied the tariff storm unleashed by Washington. Consumers keep spending, firms are reaping supply-chain realignments, and markets remain buoyant. 

Even the IMF has nudged its forecasts up, puzzled at how resilience has replaced the stagflation once feared. India, with Q1 GDP growth at 7.8%, may even outperform those revised estimates. 

But beneath the optimism, risks remain: front-loaded imports, shifting trade routes, and political brinkmanship could change the mood fast. Resilience buys time, not immunity—Atlas may shrug again.