Equities Extend Rally Despite Venezuela and Ukraine Tensions

GLOBAL MOOD: Risk-On
Drivers: Geopolitical escalation, Ukraine conflict risks

Global markets retained a risk-on tone as equities pushed higher, with investors looking through geopolitical flare-ups in Venezuela and Ukraine. Softer US manufacturing data and easing Treasury yields reinforced expectations of Federal Reserve easing, supporting risk assets. However, rising oil prices on Venezuela supply risks and lingering geopolitical tensions kept sentiment selectively cautious.

TODAY’S WATCHLIST

• India HSBC PMI Data
• India States Borrowing Auctions

THE BIG STORY
Former Venezuelan president Nicolas Maduro pleaded not guilty in a New York federal court to US narcotics charges on Monday, days after Donald Trump ordered his capture in a move that has rattled governments across Latin America and beyond. Maduro, who insisted he remains Venezuela’s legitimate president, and his wife Cilia Flores both denied the charges, with their next court hearing scheduled for March. The unprecedented operation has left officials in Caracas scrambling to regroup and raised fears of a broader shift in US interventionism.

Geopolitical tensions were further amplified in Europe, where Russia launched missile strikes on Kharkiv and targeted infrastructure linked to US agribusiness Bunge in Dnipro, according to Ukrainian officials. Kyiv said the attacks underscored Moscow’s disregard for US-led peace efforts, adding strain to already fragile negotiations aimed at ending the nearly four-year war.

Meanwhile, attention also turned north as Greenland sought to reassure citizens amid renewed US interest in the strategically vital Arctic island. Prime Minister Jens-Frederik Nielsen said Greenland aims to strengthen ties with Washington but dismissed fears of an imminent takeover, even as European leaders voiced concern that recent US actions could signal a more assertive global posture.

Data Spotlight
US manufacturing activity weakened further in December, with the ISM Manufacturing PMI falling to 47.9, the lowest since October 2024 and marking a third consecutive month of contraction. The downturn was led by softer production and a sharp pullback in inventories, reflecting ongoing uncertainty across the sector. Price pressures remained elevated, highlighting persistent cost challenges for manufacturers. On a more positive note, new orders, order backlogs and export orders showed modest improvement, while customer inventories stayed in “too low” territory, suggesting potential demand support ahead.

Takeaway: The US manufacturing remains under pressure, with contraction deepening into year-end. Early demand signals are improving, but a sustained recovery will require several months of consistent gains.

WHAT HAPPENED OVERNIGHT

• US stocks rally as financials and energy power new highs
  • US Stocks closed higher, with the Dow reaching an all-time peak, driven by strong gains in financial stocks.
  • The S&P 500 energy index rose 2.7%, its highest level since March 2025, with Exxon Mobil and Chevron posting sharp gains.
  • Investors bet that Washington’s move could open the door for US oil companies, with the Trump administration set to meet energy executives to discuss boosting Venezuelan output.
  • Aerospace and defence shares rallied, with Lockheed Martin and General Dynamics advancing, pushing the sector index to a record high.

• US Treasury yields ease as data watch takes centre stage
  • The benchmark 10-year US Treasury yield slipped to 4.17%, easing from four-month highs of 4.19% touched on Friday.
  • An initial dip in oil prices helped temper inflation worries, offering mild support to bonds.
  • The US capture of Venezuelan President Maduro lifted geopolitical tensions, prompting a modest safe-haven bid for Treasuries.
  • Investors are bracing for a data-heavy US week, led by the jobs report, to reassess growth and Fed policy expectations.

• US Dollar pulls back as focus shifts to US data
  • The dollar index retreated from a near four-week high, with the dollar index hovering around 98.5 after paring early gains.
  • Attention has shifted to key US economic releases, especially Friday’s nonfarm payrolls, which are expected to guide near-term Fed policy expectations.
  • Markets largely looked past the US capture of Venezuela’s president, with limited spillover into FX trading.
  • A weaker-than-expected ISM Manufacturing PMI weighed modestly on sentiment, capping upside for the dollar.

• Crude oil price climb on Venezuela supply risk
  • Brent crude prices settled at $61.76/barrel up 1.66%, while WTI closed at up 1.74% to $58.32/barrel.
  • Prices were lifted by fears of disruptions to Venezuelan oil exports following the US capture of President Nicolas Maduro.
  • Traders added risk premium as uncertainty grew over the future control and flow of Venezuela’s oil output, home to the world’s largest proven reserves.

Day’s Ledger

Economic Data

• India HSBC PMI Data
• India States Borrowing Auctions
• Euro HCOB PMI Data
• US Total Vehicle Sales 

Corporate Actions

• Regency Fincorp board to consider fund raising 
• Shakti Press board to consider fund raising 
• Sri Adhikari Brothers board to consider stock split 

Policy Events

• Fed Barkin Speech
  

Tickers to Watch

• ONGC enters JV with Japan's Mitsui for ethane shipping; acquires 50% stake
• NCCCL bags ₹1.13 billion construction contract from Lodha Developers
• Adani Power gets relief as Supreme Court nixes SEZ electricity duty
• Swiggy launches EatRight in over 50 cities, targets health-conscious users
• HPCL commissions residue upgradation unit at Vizag refinery, boosts margins
• How Zomato-style apps are steadily reshaping savings for young investors
• Avanse Financial Services raises ₹12 billion crore through rights issue
• RIL, ONGC likely to gain from US takeover of Venezuelan oil: Experts 

Must Read

• Telecom industry wants another technology evaluation of D2M broadcasting
• Trai slaps ₹1.50 billion penalty on telcos for failing to curb spam calls
• Govt likely to retain 4% inflation target for RBI, seeks feedback
• Railways ministry spends nearly 80% of ₹2.5 trillion GBS for FY26
• Q3FY26 results preview: FMCG companies likely to see GST-cut impact
• Crude oil prices may fall to $50/barrel by June 2026, says SBI report
• Venezuela Ushers in the Era of Trump’s ‘Donroe Doctrine’
• Maduro’s Capture Threatens China’s Ambitions in Latin America 

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

Aravallis: Making a Molehill out of a Mountain

When mountains are defined by committees and cut-off lines, geography quietly turns into policy.

TK Arun writes, the recent Supreme Court debate over what legally constitutes the Aravalli range shows how technical definitions can reshape environmental protection. A few metres on paper can decide whether a hill is preserved or mined. The Court’s decision to pause its own ruling is a reminder that when law redraws nature, precision and restraint matter as much as intent.