Risk Appetite Wavers After Nvidia Slide and Iran Talks Stall

GLOBAL MOOD: Risk Off
Drivers: US-Iran talks stall, Nvidia disappoints

Asian markets set a cautious tone Friday, with the Nikkei and Kospi slipping in early trade and the MSCI Asia Pacific Index flat, signalling a modest risk-off bias after the latest AI-driven volatility on Wall Street. US stocks fell overnight as Nvidia tumbled despite beating earnings, shaking confidence in the tech rally that has powered global equities. Treasury yields dropped to three-month lows as investors sought safety, while the dollar held firm near recent highs.

Geopolitics added to the defensive mood. US-Iran nuclear talks ended without a breakthrough, keeping military risk in play, and Ukraine tensions persist. Still, resilient US jobless claims and a rebound in regional manufacturing suggest the underlying economic backdrop remains steady, limiting the depth of risk aversion.

TODAY’S WATCHLIST

• India Revised GDP Data
• India Government Fiscal Deficit Data
• US PPI

THE BIG STORY
US-Iran nuclear talks in Switzerland ended Thursday without a breakthrough but with enough progress to keep diplomacy alive. Omani Foreign Minister Sayyid Badr Albusaidi confirmed that both sides plan to resume negotiations following consultations in their respective capitals, with technical-level discussions scheduled for Vienna next week. The absence of a deal maintains the threat of US military strikes, with a massive American military buildup already in place across the Middle East. Any meaningful progress toward an agreement remains critical as failure to reach a deal raises the risk of a broader regional conflict that markets have been nervously pricing for weeks.

On the Ukraine front, Ukrainian and US officials met in Geneva on Thursday to discuss post-war reconstruction despite an ongoing deadlock with Russia, even as Russian forces launched fresh attacks on Ukrainian infrastructure overnight. Top Ukrainian negotiator Rustem Umerov said participants spoke directly with President Zelenskiy after the meeting concluded. Zelenskiy confirmed that trilateral talks with Russia and the US are likely to take place in Abu Dhabi in early March, aimed at paving the way for a leaders' summit, a sequencing that Washington has endorsed as the path toward ending the conflict.

Data Spotlight 
US Initial jobless claims edged up 4,000 to 212,000 in the third week of February, still below the 215,000 forecast and firmly under two-year averages, while continuing claims fell sharply by 31,000 to 1,833,000,  among the lowest readings in ten months. Federal employee claims dropped by 141 to 554, easing concerns about the labour market impact of government shutdowns. The data reinforces a picture of a stable jobs market characterised by slow firing and softening but not collapsing hiring momentum. On the manufacturing front, the Kansas City Fed's Production Index rebounded strongly to 10 in February from -2 in January, with the composite index rising to 5 from 0 as employment outlooks improved and both input and finished goods price pressures moderated.

Takeaway:
The labour market resilience and a sharp Kansas City manufacturing rebound point to an economy holding firmer than the recent soft GDP print suggested. Cooling price pressures in manufacturing offer a sliver of comfort on the inflation front, but the Fed is unlikely to read these prints as sufficient justification to restart its rate-cutting cycle anytime soon.

WHAT HAPPENED OVERNIGHT

• US stocks slide as Nvidia disappoints despite earnings beat
  • The Nasdaq fell 1.2% and the Philadelphia Semiconductor Index dropped 3.2%, while the Dow eked out a nominal gain as investors rotated into cyclicals.
  • Nvidia fell 5.5% despite beating earnings estimates, investors focused on decelerating revenue growth and increasingly difficult year-on-year comparisons for the world's most valuable company.
  • Salesforce bucked the trend, gaining 4.0%, lifting the S&P 500 software and services index 1.4% - a notable reversal for a sector battered by AI disruption fears in recent weeks, even as the company issued weaker-than-expected revenue guidance.
  • Trade Desk slid 4.8% after a disappointing revenue forecast, with mounting pressure from larger rivals adding to the selloff.
  • J.M. Smucker surged 8.8% after delivering solid quarterly profit and sales figures, one of the session's standout gainers.

• US Treasury yields hit 3-month low of 4.03% as safety bid
  • The 10-year Treasury yield fell to 4.03%, it’s lowest in three months, as investors pivoted firmly toward the safety of longer-duration bonds.
  • Tariff uncertainty remained a key driver, Trump's threat of 15% tariffs under Section 122 versus the 10% rate actually implemented kept policy risk alive and safe-haven demand elevated.
  • US-Iran nuclear talks added a geopolitical layer to the safety bid, with markets seeking cover ahead of a potentially binary outcome from Geneva.
  • Nvidia's post-earnings selloff amplified the risk-off tone, pushing funds further toward Treasuries as tech-driven equity confidence wobbled.
  • Despite sticky inflation and a stable labour market conditions that would typically push yields higher demand for duration won out.

• US Dollar holds near one-month highs as labour market steadies and rate-cut bets fade
  • The US dollar index was little changed at 97.7, hovering near the one-month highs reached earlier in the week as markets awaited fresh catalysts.
  • Trade policy fears eased further, with the 10% tariff implementation broadly accepted, though uncertainty over a potential 15% rate keeps lingering doubt intact.
  • US-Iran nuclear talks in Geneva weighed on sentiment, with investors unwilling to take directional dollar bets ahead of a potentially market-moving outcome.
  • Initial and continuing jobless claims both came in below forecasts, signalling a stabilised labour market where employers continue to retain workers.

• Crude oil prices edge lower as markets await outcome of US-Iran nuclear talks
  • Brent crude prices settled at $70.75/barrel, down 0.14%, while WTI slipped to $65.21/barrel, off 0.32%.
  • A choppy session reflected a market in wait-and-see mode as investors tracked the progress of US-Iran nuclear talks in Geneva.
  • Prices oscillated between supply disruption fears if talks fail and relief-driven selling if a deal framework emerges.
  • Iran's status as an OPEC member keeps the supply stakes high as any military escalation would meaningfully tighten global crude availability.
  • The near-flat close suggests markets are holding their powder ahead of a clearer signal from Geneva on the diplomatic outlook. 

Day’s Ledger*

Economic Data

• Japan Industrial Production 
• Japan Retail Sales
• India Revised GDP Data
• India Government Fiscal Deficit Data
• India Bank Credit-Deposit Data
• India FX Reserves 
• US PPI

Corporate Actions

• Alka India board to consider raising funds
• Prabha Energy board to consider rights share issue 

Tickers to Watch

• Manappuram CEO takes medical leave as Bain Capital gains nomination rights
• Brigade, Primus to build senior communities in South India worth ₹7.50 billion
• Vedanta to raise up to ₹3,000 cr via debentures on private placement basis
• Info Edge commits Rs 250 crore to new B8 Fund I for growth-stage bets
• CBI files fresh case against Anil Ambani, Reliance Communications
• SBI MF gets RBI's nod to acquire up to 9.99% stake in Bandhan Bank

Must Read

• India's new GDP series likely to see overhaul of inflation metrics
• Govt mandates sale of petrol with up to 20% ethanol blending from April 1
• Old WPI, new GDP base year series: Economists split on the impact
• New GDP series may introduce more categories to track consumption basket
• Datanomics: FY05 vs FY12 GDP series - Industry share rose, services fell
• SEBI orders regulated entities to disclose identity on social media posts
• Revenue secretary calls for trust-based, tech-driven customs reforms
• Tech transformation in AI age brings new policy responsibilities: CEA

See you tomorrow with another edition of The Morning Edge.
Have a great trading day

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(*Compiled from various media sources)