Asia Edges Higher but Geopolitics Keep Risk Appetite in Check

GLOBAL MOOD: Cautiously risk-on
Drivers: Geopolitical escalation, Oil supply uncertainty

Global markets leaned cautiously risk-on as Asian equities advanced and investors looked through US intervention in Venezuela, focusing instead on a heavy slate of economic data. However, choppy oil prices, elevated geopolitical risk, and uncertainty over Venezuela’s oil supply kept sentiment fragile, tempering risk appetite and sustaining demand for safe-haven assets.

TODAY’S WATCHLIST
 - China Dec Caixin Services PMI
 - US Dec ISM Manufacturing PMI

THE BIG STORY
Venezuela’s government closed ranks behind President Nicolás Maduro on Sunday after his detention by US authorities, an extraordinary escalation that has plunged the oil-rich nation into deep political uncertainty. Maduro is being held in New York ahead of a court appearance on drug-related charges, following an order by US President Donald Trump, who said Washington would take control of Venezuela. In Caracas, senior officials denounced the detention of Maduro and his wife Cilia Flores as a “kidnapping” and insisted the existing leadership remains firmly in control, raising questions over governance, stability, and the future of state institutions.

For global markets, the move represents a sharp jump in geopolitical risk. While a potential political reset in Venezuela could eventually unlock vast oil reserves and support risk assets over the longer term, investors are bracing for near-term volatility and a flight to safety when trading resumes. Analysts note the scale of US intervention is unprecedented in modern Latin American history, evoking comparisons to the 1989 Panama invasion. As one economist put it, markets are once again being forced to navigate an environment dominated by headline-driven geopolitical shocks, rather than fundamentals alone.

Data Spotlight
The S&P Global US Manufacturing PMI was confirmed at 51.8 in December 2025, easing from 52.2 in November and marking the weakest expansion in the current five-month growth phase. The slowdown was driven by a first decline in new orders in a year and a seventh consecutive drop in export orders, reflecting the drag from tariffs and ongoing trade friction. Output growth also moderated, even as manufacturers continued to build inventories for a fifth straight month, albeit at a slower pace than November’s record accumulation.

Despite softer demand signals, employment rose solidly, with firms filling vacancies in anticipation of better conditions in 2026. On the cost side, input price inflation cooled to an 11-month low, while selling price increases slowed to their weakest pace since early 2025, though both remain elevated by historical standards.

Takeaway: The US manufacturing is still expanding, but momentum is clearly cooling as demand softens. Firms remain cautiously optimistic about 2026, hiring ahead of expected improvement while price pressures gradually ease.

WHAT HAPPENED OVERNIGHT

• US stocks start 2026 on firmer footing
  • The Dow Jones and S&P 500 closed higher on Friday, snapping a four-day losing streak to kick off 2026 on a positive note.
  • Chip-led rally: Semiconductor stocks outperformed, with the Philadelphia SE Semiconductor Index up 4%, led by gains in Nvidia and Intel.
  • Boeing (+4.9%) and Caterpillar (+4.5%) lifted the Dow, alongside strength in utilities.
  • Gains were capped as Apple and Microsoft slipped, while Amazon weighed on consumer discretionary stocks.
  • Tesla fell 2.6% after reporting a second consecutive year of declining annual sales.

US Treasury yields climb ahead of key jobs data

• • The benchmark 10-year US Treasury yield rose 3.8 bps to 4.19%, extending its recent rebound.
  • Investors are positioned ahead of next week’s employment reports, which are expected to shape views on US economic momentum into the new year.
  • Markets remain cautious as labour data could influence the timing and scale of potential Fed rate cuts in 2026.

• US Dollar extends weakness into 2026
  • The dollar index slipped to around 98.2 on the first trading day of 2026, extending its sharp decline from last year.
  • The greenback fell about 9% in 2025, marking its steepest annual drop in eight years.
  • Weaknesses reflect policy uncertainty around US tariffs, rising expectations of Federal Reserve easing, a narrowing yield advantage versus peers, and concerns over fiscal deficits and Fed independence.

• Crude oil price ease at start of 2026
  • Brent crude prices slipped to $60.75/barrel, while WTI fell to $57.32/barrel.
  • The decline followed oil’s steepest annual loss since 2020, keeping sentiment cautious.
  • Ample global supply continues to cap upside despite the new year reset.
  • Ongoing risks around Ukraine and Venezuelan exports provided some underlying support, limiting deeper losses.
    

Day’s Ledger

Economic Data

• China Dec Caixin Services PMI
• US Dec ISM Manufacturing PMI
• US Oct-Dec Atlanta Fed GDPNow

 Corporate Actions

• Torrent Pharmaceuticals to consider fund raising
• Satin Creditcare to consider fund raising
• Axita Cotton to consider bonus share issue

Tickers to Watch

• ADANI ENTERPRISES launched ₹10 billion NCD issue offering up to 8.9% interest and moved to acquire a 49% stake in Sree Vishwa Varadhi via its road transport arm.
• AVENUE SUPERMARTS Oct-Dec standalone revenue increased 13.2% to ₹176.1 billion, with store count at 442.
• BAJAJ FINANCE AUM jumped 22% to ₹4.850 trillion as on Dec 31, customer base expanded to 115.4 million, new loans booked rose 15%, and deposits increased 3.2% to ₹710 billion.
• BANK OF BARODA global business grew 12.2% to ₹28.900 trillion as on Dec 31, global advances rose 14.6% to ₹13.430 trillion, and global deposits increased 10.3% to ₹15.460 trillion.
• COAL INDIA subsidiary BCCL to launch IPO worth ₹10.7 billion on January 9 with a price band of ₹21–23 per share.
• DIXON TECHNOLOGIES subsidiaries received government approval under the Electronics Component Manufacturing Scheme for camera modules and optical transceivers.
• KIRI INDUSTRIES received $689 million from sale of its 37.57% stake in DyStar, concluding a long legal dispute.
• NIBE secured an Indian Army supply contract worth ₹2.9 billion for universal rocket launcher systems and equipment.
• PUNJAB NATIONAL BANK global business rose 9.6% to ₹28.920 trillion as on Dec 31, deposits grew 8.5% to ₹16.600 trillion, and advances increased 11%.
• ROYAL ORCHID HOTELS signed a new Regenta leisure property in Jodhpur under a hotel management agreement.
• SEAMEC vessel SEAMEC AGASTYA commenced charter with HAL Offshore for ONGC from January 2.
• TRIDENT group CFO Rahul Roongta resigned due to personal reasons, effective January 2.
• UNION BANK OF INDIA global advances grew 7.1% to ₹10.160 trillion as on Dec 31, global deposits rose 3.4% to ₹12.220 trillion, and CASA improved to 33.95%.
• VEDANTA Oct-Dec aluminium production rose 1% YoY to 0.62 million tonnes, zinc saleable metal grew 4%, while silver production slipped 1%.
• V-MART RETAIL Oct-Dec revenue rose 10% to ₹11.3 billion, with 23 stores added and SSSG flat.

Must Read

• Venezuela Shock: Capture of Oil Reserves Core Issue, India Remains Unaffected
• India’s Cigarette Tax Hike Tests How Addicted Profits Are
• Fixing India's Credit Blind Spot: Link Invoices to Payments
• Can India's Light-Touch AI Regulation Deliver Brilliance Without the Roulette Risk
• With Trump's capture of Venezuela, Indian geopolitics - and oil companies - will need to pivot
• China Social Media Hails US Maduro Move as a Taiwan Template
• Is the AI Boom a Bubble Waiting to Pop? Here’s What History Says
• Yellen Warns of Growing ‘Fiscal Dominance’ Threat to US Economy
• Air India set to say 'Tata' to CEO Campbell Wilson in cockpit reset

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

Venezuela, Power, and Precedent in the Western Hemisphere

Venezuela’s latest turn is less about regime change and more about power, proximity and precedent. For Washington, the Western Hemisphere has always been a strategic red line. For others, it is a reminder that rules often bend when great powers feel threatened close to home.

Ata Hasnain writes, India, however, is likely to stay cautiously neutral. It has little appetite for endorsing interventionist precedents, but it also values stability, international law and predictable energy markets. In a world of selective rules, restraint may be the most strategic choice.