Asia Mixed With Cautious Risk-on as Oil Steadies, Hormuz Tensions Ease

GLOBAL MOOD: Cautiously Risk-On
Drivers: OPEC+ Signal, Geopolitical Tensions 

Asian equities opened with a mixed but cautiously risk-on tone on Monday, as investors balanced easing energy concerns against lingering geopolitical risks in the Middle East.

Sentiment was supported by signs of stabilisation in oil markets, with WTI Crude and Brent Crude holding near recent levels after last week’s pullback. The US initiative to assist stranded vessels in the Strait of Hormuz under “Project Freedom,” announced by US President Donald Trump, helped ease immediate concerns over supply disruptions.

However, underlying risks remain, with tensions between the US and Iran unresolved and shipping flows through the critical energy corridor still vulnerable. Markets are thus adopting a wait-and-watch approach, with modest risk appetite returning but volatility likely to persist as geopolitical developments continue to drive sentiment.

TODAY’S WATCHLIST
 - India S&P Global April Manufacturing PMI
 - US FOMC Member Williams Speaks
 - Earnings: Bharat Heavy Electricals, Tata Technologies

THE BIG STORY
OPEC+ agreed to raise oil production targets by 188,000 barrels per day for June, marking the third consecutive monthly increase. However, the move was widely viewed as largely symbolic because ongoing disruptions in the Strait of Hormuz continued to restrict the actual flow of Gulf oil supplies. The latest adjustment also reflected the exit of the United Arab Emirates from OPEC+, with the group seeking to demonstrate continuity and control despite growing internal fractures.

Analysts noted that the production increase was aimed more at reassuring markets than materially boosting supply. With maritime constraints still limiting exports, the additional barrels were unlikely to significantly ease tight global energy conditions. The decision signalled that OPEC+ intended to maintain a business-as-usual posture even as geopolitical tensions in West Asia continued to dominate oil market dynamics.

Broader geopolitical risks also intensified beyond energy markets. The International Atomic Energy Agency reported that a drone targeted an external radiation monitoring laboratory linked to the Zaporizhzhia nuclear plant in Ukraine, renewing concerns around nuclear safety risks in conflict zones.

At the same time, tensions between the US and Europe escalated after Donald Trump criticised key European leaders over their stance on the Iran conflict and threatened fresh tariffs and military measures against NATO allies. The increasingly confrontational tone raised concerns over growing strains within Western alliances at a time of heightened geopolitical instability.

Data Spotlight 
US manufacturing activity remained steady in April, with the ISM Manufacturing PMI holding at 52.7, matching its strongest level since August 2022. New orders improved further and supplier delivery times continued to lengthen, reflecting resilient industrial demand despite disruptions linked to the conflict in West Asia. However, production growth slowed and employment contracted at the fastest pace in four months, suggesting firms remained cautious about future conditions.

Price pressures intensified sharply, with input costs rising at the fastest pace since April 2022 due to higher oil and diesel prices. Survey commentary also reflected a deteriorating mood among manufacturers, with negative responses significantly outweighing positive ones as geopolitical tensions and trade concerns weighed on confidence.

Meanwhile, inflation-adjusted personal spending growth slowed to 0.2% in March, pointing to more cautious consumer demand. Spending weakened across several key categories including vehicles, energy goods and transportation services, although some recovery was seen in recreation and financial services.

Takeaway:
The US economy continued to show resilience in manufacturing activity, but rising energy-driven inflation and softer consumer spending trends suggested that growth momentum was becoming increasingly uneven.

WHAT HAPPENED OVERNIGHT

• US stocks reached record highs as earnings strength outweighed energy concerns
  • S&P 500 gained 0.29% while Nasdaq rose 0.89% to fresh record close while Dow Jones declined 0.31% despite broader technology-led gains.
  • Softer oil prices and strong corporate earnings supported investor sentiment.
  • Nasdaq and S&P 500 recorded sixth consecutive weekly gains, longest streak since October 2024.
  • Apple climbed 3.3% after strong sales outlook for iPhone 17 and MacBook Neo.
  • Atlassian surged nearly 30% after raising annual forecast, lifting broader software sector.
  • Reddit jumped 13.1% on stronger revenue guidance, while Roblox fell sharply after lowering bookings outlook.
  • Energy majors Exxon Mobil and Chevron weakened as West Asia disruptions pressured profitability.

• US Treasury yield declined as easing oil prices softened inflation fears
  • The US benchmark 10-year yield fell to 4.35%, around 10 bps below recent highs.
  • Pullback in oil prices reduced immediate inflation concerns despite ongoing geopolitical tensions.
  • Iran submitted a fresh proposal after Donald Trump rejected earlier concessions and maintained naval blockade measures.
  • Energy and goods exports from West Asia remained heavily disrupted.
  • Manufacturing price pressures and stronger new orders continued to support a hawkish Fed outlook.
  • Core PCE inflation accelerated while labour market data remained resilient.

• US Dollar fell to multi-month low as yen surged after suspected intervention
  • The US dollar index slipped below 98, reaching its lowest level since late February.
  • Greenback extended losses after its sharpest daily decline since mid-March.
  • Japanese yen rallied strongly amid suspected intervention by Japanese authorities.
  • Reports suggested US officials were informed in advance in line with G7 coordination practices.
  • US manufacturing activity remained at a four-year high in April, supported by strong orders and supply delays.
  • Rising price pressures linked to the West Asia conflict continued to reinforce inflation concerns.
  • Fed officials Beth Hammack and Neel Kashkari criticised the latest Fed statement as overly dovish.

• Oil fell on diplomacy hopes but weekly gains remained intact
  • Brent crude declined 2.0% to $108.17 per barrel, while WTI dropped 3.0% to $101.94.
  • Prices retreated after Iran submitted a fresh negotiation proposal to the US through Pakistani mediators.
  • Markets viewed the proposal as a possible step toward breaking the diplomatic deadlock.
  • Despite Friday’s decline, oil remained on track for strong weekly gains amid ongoing supply disruptions.
  • Strait of Hormuz traffic restrictions and US naval blockade on Iranian exports continued to tighten global supply conditions.

Day’s Ledger*

Economic Data

• India S&P Global April Manufacturing PMI
  
• Germany HCOB April Manufacturing PMI
  
• US Factory Orders March Data 

Corporate Actions

• Earnings: Aarti Industries, Aditya Birla Capital, Ambuja Cements, Ather Energy, Bharat Heavy Electricals, CSB Bank, Exide Industries, Godrej Properties, IIFL Capital Services, Jaiprakash Power Ventures, Jindal Stainless, Manappuram Finance, Petronet LNG, Sobha, Tata Chemicals, Tata Technologies, Wockhardt

Policy

• US FOMC Member Williams Speaks 
  
• German Buba President Nagel Speaks  

Tickers to Watch

• BANK OF INDIA approved fundraising of up to ₹75 billion for FY27.
• BRIGADE ENTERPRISES board to consider bonus issue on May 6.
• CEIGALL INDIA JV won Jaipur Metro Phase II project worth ₹9.18 billion; company holds 74% stake.
• COAL INDIA April production fell 9.7% YoY to 56.1 million tonnes; offtake down 2% to 63.2 million tonnes.
• EFC (INDIA) approved rights issue of 10.7 million shares at ₹150 each aggregating ₹1.60 billion; record date May 7.
• HYUNDAI MOTOR INDIA April total sales at 65,610 units; domestic sales up 17% YoY to 51,902 units.
• MARUTI SUZUKI INDIA April total sales jumped 33% YoY to 0.239 million units; domestic sales up 31%, exports up 44%.
• MARUTI SUZUKI INDIA April production rose 16.5% YoY to 0.21 million units; PV output up 16.6%.
• NCC secured four orders worth ₹17.03 billion in April.
• NMDC April production rose 16% YoY to 4.64 million tonnes; sales up 1.4% to 3.68 million tonnes.
• SIEMENS received internal work allocation worth ₹18.25 billion for manufacturing bogies, traction motors and gearboxes.
• SOLEX ENERGY signed MoU with Gujarat government for solar cell and BESS projects with total cost of ₹40 billion.
• TATA MOTORS (CV) April sales rose 28% YoY to 34,883 units, beating estimates.
• TATA MOTORS (PV) April sales surged 31.1% YoY to 59,701 units; domestic sales up 30.5%.
• TATA POWER arm to invest ₹65 billion to set up a 10 GW photovoltaic ingot/wafer manufacturing facility.
• TVS MOTOR April sales grew 7% YoY to 0.47 million units.
• VODAFONE IDEA informed that DoT finalised AGR dues at ₹640.46 billion as of Dec 31, with repayments from FY32 onward.

Must Read

• A Regime Shift for India’s BoP
• A US-India Partnership for the AI Age
• Bigger Sun, Dimmer Returns
• HUL Spent Two Years Blaming Rural. The Real Margin Story Is Structural
• India's Gaming Crackdown Spares the Ones Who Matter Most  
• Powell, Power, and the Cost of Credibility
• RBI Leans on FDI, Trade Deals as Rupee Tests Record Lows
• Economic Review Flags Supply Risks as India Faces a Harder Inflation Test
• RBI’s Currency Curbs Leave Markets Nursing More Than Losses
• Policy Denial Meets OIS Pricing in India’s Inflation Reality

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

Don’t Build Speed Bumps on India’s Digital Expressway

RBI’s proposal to introduce a delay in instant payments raises a larger question about how India addresses digital fraud.

Rajesh Bansal writes, slowing down transactions may create temporary friction, but it does little to address the real issue: weak KYC, mule accounts, and gaps in real-time monitoring. As India builds one of the world’s fastest payment ecosystems, the challenge is no longer speed, but trust and accountability.

(*Compiled from various media sources)