Asian Markets Rise as Earnings Boost Risk Appetite Despite Iran Tensions

Global Mood: Cautiously Risk-on
Drivers: US Blockade Indefinite, Ukraine Black Sea Truce Offer

Asian markets opened higher Friday, extending the risk-on tone from Wall Street as strong corporate earnings outweighed persistent geopolitical risks. South Korea’s Kospi gained 2.54%, while Japan’s Nikkei rose 0.75%; Australia’s ASX 200 slipped 0.63%. US equities reached record highs, supported by robust earnings, with S&P 500 profit growth tracking around 50% y/y after more than 90% of companies reported. The strong earnings backdrop is reinforcing expectations that corporate fundamentals can withstand elevated uncertainty.

However, the US-Iran conflict remains a key risk. Washington signalled it could sustain its naval blockade indefinitely and threatened tougher economic measures, while attacks on vessels in the Strait of Hormuz continued. The IEA also lowered its global oil supply outlook, raising concerns over energy-driven inflation and growth. Meanwhile, Ukraine’s proposal for a Black Sea shipping ceasefire offered a limited diplomatic positive, though Russia has yet to respond. Overall, sentiment remains risk-on but vulnerable to geopolitical and oil shocks.

THE BIG STORY
The US-Iran war settled into a grinding war of economic attrition Thursday as Defence Secretary Hegseth declared Washington could maintain its naval blockade of Iran "indefinitely," rotating ships in and out as needed, while Treasury Secretary Bessent warned of unprecedented new economic isolation measures coming next week. Iran continued attacking vessels in Hormuz, with two ADNOC tankers struck Thursday, as the IEA revised its global oil supply forecast down to a 4.3 million bpd fall this year, up from 3.7 million bpd projected just a month ago. Global economists are warning of recession risk in some regions if the war continues. With Trump under domestic pressure ahead of November midterms and neither side willing to meet the other's conditions, the conflict has entered a phase of mutual economic punishment with no diplomatic off-ramp in sight.

A separate and significant intelligence story emerged Thursday: the US could not independently verify several Israeli warnings of Iranian assassination plots against Trump, including an alleged shoulder-launched missile threat during the Ankara NATO summit that prompted a secret aircraft switch. The CIA assessed low confidence in some of the Israeli intelligence, and Turkey also found no corroborating evidence, raising questions about how unverified Israeli threat assessments have influenced US decision-making on Iran throughout the conflict. In Ukraine, Kyiv offered Russia a Black Sea ceasefire on civilian shipping targets via a third party, as Ukrainian grain exports have collapsed 76% year-on-year in August and global food supply fears mount following the Novorossiysk attack. Moscow had not formally responded, with a deputy foreign minister saying no formal proposal had been received.

Data Spotlight
US producer prices were flat in July, below expectations of a 0.2% gain, as a 0.7% decline in goods prices driven by a 3.1% drop in energy and a 5.7% plunge in gasoline offset a 0.2% rise in services. Year-on-year, PPI slowed to 4.7% from 5.5% in June, well below forecasts of 4.9%, while annual core PPI came in at 4.2%, in line with expectations.

Initial jobless claims rose 9,000 to 209,000 in the first week of August, above expectations of 202,000, though continuing claims fell 22,000 to 1,777,000. The data pointed to some labour market resilience despite July's weak payroll print, broadly consistent with FOMC assessments of full employment.

Takeaway: Flat producer prices and slowing annual PPI add to the disinflationary signal from July's CPI print, reinforcing the case for the Fed to hold rates steady. A modest rise in initial claims bears watching but does not yet challenge the broader picture of a resilient, if softening, labour market. 

WHAT HAPPENED OVERNIGHT

US stocks hit record highs as soft PPI and AI earnings momentum lift sentiment

• The S&P 500 gained 0.65% to a record close, Nasdaq rose 0.81%, and the Dow added 0.13%, with the S&P 500 now up 14% and Nasdaq 15% year-to-date.
• July PPI was unchanged, with goods prices falling and services costs rising marginally, reinforcing the case for a Fed hold in September and lifting hold odds to 63% per CME FedWatch.
• SanDisk surged 13.7% and Micron rose 4.2%, while Microsoft added 1% and Meta gained 2.8%, as strong AI infrastructure earnings from Microsoft and Amazon continued to underpin tech sentiment.
• Weekly jobless claims increased moderately, pointing to a stable labour market, while Iran and the US remained at loggerheads over the peace deal with Hormuz traffic severely curtailed.

US Treasury yields ease further as soft PPI consolidates case for September Fed hold

• The 10-year yield dipped to 4.66%, extending its pullback from the 19-month high of 4.75% hit two sessions prior, after July PPI came in flat against expectations of a 0.2% rise.
• Back-to-back soft CPI and PPI prints consolidated the view that current inflation levels do not warrant a September Fed hike.
• The yield decline was more muted at the long end as lingering energy supply risks kept near-term inflationary concerns alive.
• A weakening yen raised concerns over potential Japanese intervention and subsequent selling of US Treasuries by the largest foreign holder, with a tail in the latest 10-year note auction reflecting these risks.

Dollar slips to 99.9 as soft PPI reinforces case for Fed hold in September

• July PPI came in flat, missing the 0.2% forecast, following Wednesday's tame CPI, with back-to-back soft prints pushing September hold odds to 65%.
• The data suggests the initial inflationary impact of the West Asia conflict and higher energy costs may be fading, though renewed regional tensions continue to pose upside risks to the outlook.
• Weekly jobless claims ticked up but remained historically low, while recent employment data indicated the labour market has been weaker than previously estimated.

Oil settles down 2% as weak demand outlook and hefty US inventory build overshadow supply risks

• Brent settled at $87.07/bbl, down 2.15%, and WTI at $81.25, down 2.4%, reversing a six and five-session rally respectively, after falling over 3.5% earlier before paring losses on Houthi drone attack reports.
• US crude inventories rose 17.4 million barrels to 424.4 million in the week ended August 7, their largest weekly build since January 2023, driven by slumping exports.
• Both OPEC and the IEA cut their 2026 demand forecasts, with OPEC lowering growth to 580,000 bpd and the IEA projecting a 1.6 million bpd contraction, up from 1 million bpd last month.
• Houthis targeted Saudi Aramco's Jazan refinery with two drones, sending diesel crack spreads to an all-time high, with the 250,000 bpd ultra-low sulfur diesel facility already having faced previous attacks.
• Iran's Basij chief declared the strait "under Iran's control and management," directly contradicting Trump's claim of US "total control," with vessel crossings excluding container ships falling to five on Wednesday, their lowest in three weeks.
• US Defense Secretary Hegseth said the US military could maintain its Iranian port blockade for as long as needed, while US Energy Secretary Wright said 9 million bpd was moving through the strait weekly.
• Russia's seaborne oil product exports fell sharply in July after Ukrainian drone attacks forced unplanned refinery maintenance, with the Orsk refinery now shut for up to six months following a recent strike.

Day’s Ledger*

 Economic Data

• India July WPI Inflation
• Euro Zone June Trade Balance 
• Euro Zone April-June GDP
• India weekly FX Reserves Data
• India June Balance of Payments Data
• US July Retail Sales

Corporate Actions 

• Earnings: Alkem Laboratories, BCPL Patanjali Foods, Zee Media Corporation.

Tickers to Watch

• PIRAMAL PHARMA is likely to see a block deal involving around 6% of its total equity, with the seller seeking to raise approximately 17.5 billion rupees through the transaction at a minor discount to the current market price.
• KRBL net profit rose 73.2% y/y to 2.61 billion rupees in the April-June quarter from 1.51 billion rupees, while revenue declined 5.6% to 14.96 billion rupees from 15.85 billion rupees in the year-ago quarter.
• ADITYA BIRLA REAL ESTATE arm Birla Estates enters Navi Mumbai's redevelopment market with a Vashi housing project that has revenue potential of around 26 billion rupees, marking its first project in the micro-market.
• SAMMAAN CAPITAL consolidated net profit declined 27.2% y/y to 2.43 billion rupees in the April-June quarter from 3.34 billion rupees a year earlier.
• MAX FINANCIAL SERVICES Value of New Business rose 33% y/y to 4.46 billion rupees in the April-June quarter from 3.35 billion rupees, ahead of the CNBC-TV18 poll estimate of 3.98 billion rupees.
• JSW CEMENT reported consolidated net profit of 1.61 billion rupees in the April-June quarter, reversing a loss of 13.56 billion rupees a year earlier, while revenue from operations rose 21.6% y/y to 18.96 billion rupees from 15.60 billion rupees.
• LG ELECTRONICS INDIA net profit rose 27.2% y/y to 6.53 billion rupees in the April-June quarter from 5.13 billion rupees, while revenue increased 15.5% to 72.33 billion rupees from 62.63 billion rupees.
• TATA MOTORS PV consolidated revenue rose to 957.99 billion rupees in the April-June quarter from 876.77 billion rupees a year earlier, while EBITDA declined to 61.76 billion rupees from 77.58 billion rupees and EBITDA margin contracted to 6.5% from 8.8%.
• INDIGO PAINTS consolidated net profit rose 60% y/y to 417 million rupees in the April-June quarter from 261 million rupees, supported by double-digit sales growth and improved operating margins.
• HONASA CONSUMER net profit rose 118.4% y/y to 902 million rupees in the April-June quarter from 413 million rupees, while revenue reached a record 7.56 billion rupees, up 27% y/y from 5.95 billion rupees.
• BRIGADE ENTERPRISES net profit rose 33.7% y/y to 2 billion rupees in the April-June quarter from 1.5 billion rupees in the year-ago quarter.
• BANK OF BARODA completes the issuance of 700 million dollars of notes.
• SAMVARDHANA MOTHERSON issues a corporate guarantee of 16 billion rupees for its subsidiary.
• ICICI BANK completes the issuance of 300 million dollars of senior unsecured fixed-rate notes.

Must Read

• A Perfect Closing Price Is Not Enough
• What Silicon Valley’s Open-Weight AI Push Means for India
• The Indian Media Problem Is Bigger Than Trust
• Grown, Not Drilled: Ethanol Could Be India’s Most Exportable Idea
• The Growing Opacity in India's Infrastructure Data

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day