Cautious Risk Mood as Strong US Data Offsets Geopolitical Easing

GLOBAL MOOD: cautiously Risk-Off
Drivers: Iran protests easing, US restraint signal, Venezuela diplomacy

Global markets remain in a cautious risk-off-to-neutral mode as investors weigh easing geopolitical tensions against firm US data and policy uncertainty. Asian equities were mixed, with Japan lagging ahead of the Bank of Japan meeting, while US stocks found support from strong bank earnings and chip-sector strength. Resilient US labour and manufacturing data lifted Treasury yields and the dollar, tempering expectations of near-term Fed cuts, even as softer Iran-related risks eased pressure on oil prices.

TODAY’S WATCHLIST
 - US Fed Bowman Speech
 - Oct-Dec Earnings: RIL, Wipro, Tata Tech, Tech Mahindra, L&T Finance, Federal Bank

THE BIG STORY
US President Donald Trump signalled a more cautious, wait-and-see approach toward Iran on Thursday after being told that killings linked to the crackdown on anti-government protests were easing and that there were no immediate plans for mass executions. The shift in tone came after Iranian officials and state media suggested a reduction in the use of capital punishment, even as Washington reiterated that “all options remain on the table” should violence against protesters resume. The episode underscored the delicate balance between US pressure and restraint as unrest in Iran marks one of the most serious challenges to clerical rule in years.

Meanwhile, Venezuelan opposition leader Maria Corina Machado sought to strengthen ties with Washington, saying she presented her Nobel Peace Prize to Trump during a high-stakes meeting aimed at shaping Venezuela’s political future. While largely symbolic, the gesture highlighted opposition efforts to secure US influence and support at a time of heightened geopolitical uncertainty across energy-rich regions.

Data Spotlight 
US initial jobless claims unexpectedly dropped 9,000 to a seasonally adjusted 198,000 for the week ended January 10, though the decline likely reflects seasonal adjustment challenges around year-end holidays. Unadjusted claims surged 31,984 to 330,684, far exceeding the government's seasonal model's projected 45,652 increase, underscoring the labour market's "low-hire, low-fire" equilibrium that tempers Federal Reserve rate-cut urgency.

New York Empire State Manufacturing Index rebounded sharply to 7.7 in January 2026 from December's revised -3.7, topping expectations of 1.0, with new orders up to 6.6 and shipments accelerating to 16.3. Delayed US export prices rose 3.3% year-over-year in November 2025 versus October data unavailable due to government shutdown, driven by 2.6% agricultural gains and 3.3% non-agricultural advances; over two months to November, prices climbed 0.5%.

Takeaway:
A resilient US labour market and manufacturing rebound signal economic stability, enabling Fed easing pressures despite seasonal data noise. Export price strength points to sustain competitiveness amid global trade recovery.

WHAT HAPPENED OVERNIGHT

• US stocks rebound as banks surge in profits
  • US stocks climbed on Thursday, halting a two-day slide, driven by strong quarterly results from Wall Street giants and positive chip sector news.
  • Goldman Sachs shares soared 4.6%, lifting the Dow while Morgan Stanley jumped 5.8%, both buoyed by robust dealmaking and rising quarterly profits.
  • Taiwan chip leader TSMC's blockbuster results and US expansion plans sent its US-listed shares up 4.4%, boosting domestic chipmakers.

• US Treasury yields rise on labour market data resilience
  • The benchmark 10-year US Treasury yield rose to 4.16% on Thursday, nearing four-month highs of 4.2% hit earlier in the week amid signs of market stability.
  • Initial unemployment claims fell sharply below expectations, sustaining low average claims since December and countering fears of rising job cuts despite elevated rates.
  • Strong data reduces urgency for Federal Reserve rate reductions, challenging dovish FOMC arguments for further easing to support employment.

• US Dollar hits six-week high on firm labour data
  • The US dollar index climbed 0.24% to 99.31, touching 99.49, its highest level since early December.
  • Initial jobless claims fell 9,000 to 198,000, well below expectations, signalling continued resilience in the US labour market.
  • Stronger data reinforced bets that the Federal Reserve will keep interest rates on hold for the coming months.
  • Reduced urgency for near-term rate cuts lent support to the greenback against major peers.

• Crude oil prices fall over 4% as supply risk fears ease
  • Brent crude prices settled lower at $63.76/barrel down 4.15%, while WTI dropped 4.56% to $59.19 snapping a five-day winning streak.
  • President Trump's comments signaled reduced crackdown on Iranian protesters, calming markets over potential US military action and oil supply risks.
  • De-escalation rhetoric outweighed prior tensions, driving the sharp reversal despite ongoing Middle East uncertainties.

Day’s Ledger

Economic Data

• US Fed Balance Sheet
• US Capacity Utilisation Data
• India FX Reserves 

Corporate Actions

• Oct-Dec Earnings: Central Bank of India, Federal Bank, Himadri Speciality, JB Chem, JSW Infra, Jindal Saw, L&T Finance, Polycab India, Poonawalla Fincorp, RIL, Sobha, Tata Tech, Tech Mahindra, Wipro
• Varvee Global board to consider stock split

Policy Events

• US Fed Bowman Speech

Tickers to Watch

• L&T Tech Q3FY26 results: Profit falls 6% as new labour codes push up costs
• HDFC Life's Q3FY26 results: Net profit rises marginally to ₹421 crore
• Higher expenses drag Angel One Q3 profit down 4.5% to ₹269 crore
• GPL claims top spot among listed peers by bookings, collections in CY25
• Waaree Renewable Tech Q3 results: Profit more than doubles to ₹120 crore
• LIC demerger, PSU insurer divestment drive 'Insurance for All by 2047
• Two more HUL manufacturing units receive WEF Lighthouse recognition
• PFC launches third public NCD issue, eyes ₹5,000 crore fundraising

Must Read

• India readies plans to evacuate nationals from Iran amid rising tensions
• Centre to soon frame rules to integrate MGNREGA workers into VB-G RAM G
• Market regulator Sebi may soon revise MF categorisation framework
• Unemployment rate inches up in Dec to 4.8%, still the second-lowest in FY26
• Goldman Sachs plans bond sale of at least $12 billion after Q4 results
• Trump warns of invoking Insurrection Act as Minnesota protests grow
• Exit polls project Mahayuti win in BMC as Maharashtra polls see 50% turnout
• European troops arrive in Greenland amid Trump's push to acquire island

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

A Requiem for Reading 

Former RBI Deputy Governor Michael Patra’ writes, Reading is fading fast as screens take over daily life. Reviving this habit is essential if societies hope to preserve knowledge, empathy, and cultural memory.