Asia Edges Higher but Fragile Ceasefire Keeps Risk Mood Cautious

GLOBAL MOOD: Cautious Risk-on
Drivers: Escalation Risk, Ceasefire Uncertainty, Diplomacy Hopes

Asia-Pacific markets opened with a cautious risk-on tilt on Friday, supported by a temporary US–Iran ceasefire, but sentiment remained fragile amid signs of strain in the truce. Gains in the Kospi and Nikkei 225 reflected initial relief, even as restricted flows through the Strait of Hormuz kept energy concerns elevated.

Oil prices, with WTI Crude and Brent Crude holding near recent highs, underscored ongoing supply disruption risks. Tensions resurfaced after Donald Trump warned Iran against imposing tanker charges, while Tehran accused Washington of breaching ceasefire terms.

With the Strait still largely blocked and geopolitical frictions extending to Lebanon, markets are balancing short-term relief against persistent uncertainty, leaving volatility in energy prices and risk sentiment elevated.

TODAY’S WATCHLIST
 - US CPI Inflation Data
 - ECB Guindos Speech
 - India Credit-Deposit Data 

THE BIG STORY
The fragile US–Iran ceasefire is showing clear signs of stress as Israel intensifies its military campaign in Lebanon, prompting fresh retaliation threats from Iran and raising doubts over the durability of the truce. Israeli Prime Minister Benjamin Netanyahu has signalled readiness for direct talks with Beirut following the heaviest strikes of the conflict, even as the violence risks derailing diplomatic momentum. Preparations are underway in Islamabad for US–Iran negotiations, but the ground reality suggests a widening gap between military actions and diplomatic intent.

A key flashpoint remains the Strait of Hormuz, where Iran continues to maintain a near-total blockade, severely disrupting global energy flows. Tehran has linked any meaningful de-escalation to Israel’s actions in Lebanon, while also signalling a more assertive stance on controlling the strategic waterway. US President Donald Trump has pushed back against reports of Iran charging transit fees, warning against further escalation even as his administration explores broader strategic recalibrations, including troop positioning in Europe.

The situation underscores a deeper geopolitical shift, with tensions extending beyond West Asia into transatlantic relations. For markets, the persistence of supply disruptions and uncertain diplomacy suggests that volatility in energy prices and inflation expectations is likely to remain elevated in the near term.

Data Spotlight
The US economy expanded at a sharply revised 0.5% annualised rate in Q4 2025, down from earlier estimates, reflecting weaker investment and softer consumer spending, which slowed to 1.9%. Residential investment contracted 1.7%, while exports fell 3.2%, highlighting broader demand weakness. Government spending also declined 5.6%, dragging on overall growth. Despite this, personal spending rose 0.5% month-on-month in February, though real (inflation-adjusted) spending increased just 0.1%, indicating limited underlying momentum.

On inflation, core PCE rose 0.4% month-on-month and 3.0% year-on-year, remaining well above the Fed’s target and signalling persistent price pressures. Labour market data remained relatively stable, with initial jobless claims rising to 219,000, while continuing claims fell to 1.79 million, suggesting low layoffs despite slower hiring momentum.

Takeaway:
Growth is losing pace with softer consumption and investment, but sticky inflation and a still-resilient labour market complicate the path for policy easing.

WHAT HAPPENED OVERNIGHT

• US stocks advance as diplomacy hopes support sentiment
  • Dow Jones gained 0.58%, S&P 500 rose 0.62%, and Nasdaq advanced 0.83%.
  • Markets recovered from early losses as progress in West Asia negotiations eased geopolitical concerns.
  • Israel’s move to initiate talks with Lebanon supported late-session sentiment.
  • Consumer discretionary stocks outperformed, led by Amazon rising 5.6% on strong AI-driven revenue outlook (~$15 billion annualised).
  • Constellation Brands jumped 8.5% after better-than-expected sales performance.
  • Applied Digital declined 8% following wider quarterly losses.
  • Overall sentiment remains supported by diplomacy, though underlying risks persist.

• US Treasury yield steady near lows as growth concerns offset geopolitical risks
  • The 10-year yield holds around 4.30%, lowest since mid-March.
  • Yields remain anchored despite fragile West Asia ceasefire and ongoing tensions.
  • Continued closure of Strait of Hormuz and rising oil prices add to inflation uncertainty.
  • Safe-haven demand balanced by concerns over slowing growth momentum.
  • Macro data mixed, with PCE inflation in line, weaker GDP revision and higher jobless claims.
  • Markets remain cautious ahead of further clarity on both inflation and geopolitical developments.

• US Dollar slips as ceasefire fragility and soft data weigh
  • The US dollar index dips below 99, hitting lowest level over two weeks.
  • Early gains fade as West Asia ceasefire shows signs of strain ahead of peace talks.
  • Ongoing tensions, including Israel–Hezbollah conflict and Iran’s accusations against the US, limit safe-haven demand.
  • Continued closure of Strait of Hormuz adds to uncertainty but fails to support the dollar meaningfully.
  • Macro data mixed, with PCE inflation in line, softer GDP revision and slight uptick in jobless claims.
  • Markets remain focused on growth risks and policy outlook rather than safe-haven flows.

• Oil edges higher amid ceasefire uncertainty and volatile supply outlook
  • Brent crude rises 1.2% to $95.92 per barrel, while WTI gains 3.7% to $97.87.
  • Prices remain below $100 for second straight session despite intraday volatility.
  • Early gains of over 5% driven by concerns over fragile US–Iran ceasefire and Strait of Hormuz flows.
  • Gains pared after Israel signals willingness to begin peace talks with Lebanon.
  • Volatility reflects tug-of-war between supply disruption risks and de-escalation hopes.
  • Energy markets remain highly sensitive to geopolitical headlines in West Asia. 

Day’s Ledger*

Economic Data

• China Inflation Rate
• India Credit-Deposit Data
• India FX Reserves
• India M3 Money Supply
• US CPI Inflation Data

Corporate Actions

• Jan-Mar Earnings: Agri Tech India, Eco Hotels,
• Almondz Global board to consider fund raising
• Oasis Securities board to consider rights share issue
• Pennar Industries board to consider fund raising
• Muthoot Finance board to consider interim dividend

Policy

• ECB Guindos Speech

Tickers to Watch

• Wipro to consider share buyback proposal at board meet next week
• Policybazaar Insurance Brokers appoints Sajja Praveen Chowdary as CEO
• High Court quashes petition against Mukesh Ambani & RIL, fines complainant
• Royal Enfield's EV brand Flying Flea launches first motorcycle C6
• IndusInd Bank appoints Jagdeep Mallareddy as consumer banking head
• Ather Energy doubles its experience centre network to 700 last fiscal
• TCS renews multi-year partnership with UK retailer Marks & Spencer
• Axis Bank joins interoperable netbanking platform Banking Connect
• TCS Q4 results: Net profit jumps 12.2% to ₹137.18 billion, revenue up 9.6%
• Anand Rathi Q4 result: Profit up 25% to ₹920 million; dividend declared
  
  

Must Read

• RBI allows NBFCs access to term money market; volumes likely to rise
• CDSCO moves to fast-track foreign drug import approvals, cut delays
• West Asia oil shock threatens India despite robust buffers: World Bank
• RBI tightens timelines for inward remittances, mandates faster credit
• Banks exit bulk of India rupee arbitrage positions ahead of RBI deadline
• India's Hormuz dependence higher than global average: Oil secretary

 

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day

𝐍𝐨𝐭 𝐎𝐮𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐖𝐨𝐨𝐝𝐬 𝐘𝐞𝐭

Reserve Bank of India may be on pause, but the risks are anything but. The current energy shock is not just a price story—it is feeding into expectations, costs and eventually broader inflation dynamics.

Dhiraj Nim writes, as long as supply disruptions dominate, policy can afford patience. But if inflation becomes broad-based and stays above 5% for long, credibility risks begin to creep in, even without breaching the 6% threshold.

(*Compiled from various media sources)