Asia Opens Cautious as Geopolitical Tensions Rise and US Fed Decision Looms

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By Richard Fargose

December 8, 2025 at 1:41 AM IST

GLOBAL MOOD: Mild Risk-Off
Drivers: China-Japan Friction, Ukraine Peace Talks, Fed Cut Expectations

Asian markets reflected a cautious, mildly risk-off tone as geopolitical friction between China and Japan intensified and traders awaited a wave of central bank decisions. Expectations of a Fed rate cut remain high, but uncertainty around global policy and diplomacy kept sentiment guarded.

TODAY’S WATCHLIST
- China Trade Data

THE BIG STORY
US’s push to end the Ukraine war has moved to its most delicate stage yet, with President Donald Trump’s envoy saying a peace deal is “really, really close” after high stakes talks in Moscow. Only two issues remain unresolved the future of Donbas and control of the Zaporizhzhia nuclear plant, but the Kremlin insists key US proposals still need “radical changes.” Despite the optimism, the negotiations sit on fragile ground as Kyiv resists territorial concessions, and Europe warns against a settlement tilted toward Moscow.

The Federal Reserve heads into what may be its most divisive meeting in years. Policymakers are split over whether to cut interest rates this week, with unusually high dissent brewing inside the FOMC. Some officials fear easing too soon risks fuelling inflation, while others argue the softening labour market warrants action. Markets will be watching not just the decision, but how Chair Jerome Powell navigates a Fed openly wrestling with its next move.

Data Spotlight
US personal spending rose 0.3% in September 2025, matching expectations and driven almost entirely by a strong rise in services activity, led by housing and utilities, healthcare, financial services, and food services. Goods spending was broadly flat, as higher gasoline outlays offset declines in autos, recreational goods, and apparel.

The University of Michigan Consumer Sentiment Index improved to 53.3 in December from 51, supported by better expectations for personal finances especially among younger consumers though labour market views remain historically weak. Overall, the data points to steady but uneven consumer momentum.

Takeaway: Spending is holding up mainly through services strength, while sentiment has stabilised but remains fragile amid lingering economic uncertainty.

WHAT HAPPENED OVERNIGHT

US stocks rebound as Fed cut bets firm
- US stocks closed up Friday with S&P 500 and the Dow rose 0.2%, and Nasdaq inched up 0.4% aided by soft PCE data and improved Michigan sentiment.
- Mega caps led gains with Alphabet up 1.2%, Meta rose 1.8%, Broadcom surged 2.4% and Microsoft gained 0.5%.
- Netflix fell 2.9% after the Warner Bros Discovery deal, though losses pared with reports of potential regulatory scrutiny.

US Treasury yields climb as markets weigh 2026 Fed path
- The 10-year US Treasury yield rose to 4.10%, a two-week high, as traders reassessed the Fed’s policy trajectory for next year.
- Michigan consumer sentiment improved in December, easing some worries about high living costs and weak hiring dampening spending.
- The improved sentiment contrasts with recent labour data showing slower hiring, raising questions about the Fed's pace of easing in 2026.
US Dollar softens ahead of Fed decision
- The Dollar index slipped 0.1% to 98.99, hovering near Thursday’s five-week low of 98.765.
- The index fell 0.5% for the week as traders positioned for easing with 25 basis points Fed rate cut this week.
- Traders also anticipate two additional cuts next year, keeping the dollar subdued within recent ranges.

Crude oil prices rises to two-week high on Fed cut hopes
- Brent crude prices settled at $63.75 up 0.8% and WTI ended at $60.08 up 0.7%, marking their highest closest since 18 November.
- Prices were supported by growing expectations of a Fed rate cut this week, which could strengthen economic activity and lift fuel demand.
- Geopolitical uncertainty around Russia and Venezuela continued to underpin a supply-risk premium, offering additional upside momentum for crude.

Day’s Ledger

ECONOMIC DATA
China November Trade Data
German October Industrial Production Data
US September Factory Orders Data

CORPORATE ACTIONS

One Point One Solutions to consider fund raising
NACL Industries to consider fund raising
IndiGrid Infrastructure to consider fund raising

TICKERS TO WATCH

ASHOKA BUILDCON gets additional BMC work worth ₹4.47 billion, taking project value to ₹15.74 billion.
BIOCON to fully integrate BIOCON BIOLOGICS through a share swap; BBL valued at $5.5 billion; BIOCON PHARMA gets
US FDA tentative approval for Carbidopa–Levodopa ER capsules
COCHIN SHIPYARD signs contract with Svitzer to build four fully electric 26-metre tugs, with option for four more.
DELHIVERY completes testing of autonomous VTOL drone technology in Deoria, Uttar Pradesh.
ETERNAL an institutional investor plans to sell a 0.5% stake via a block deal worth up to ₹15 billion.
HFCL secures export orders of ₹6.56 billion for optical fibre cables via overseas subsidiary.
ICICI BANK: ICICI Prudential AMC files RHP for an IPO worth ₹106.03 billion, opening December 12–16.
INDIGO: DGCA grants more time to CEO and Accountable Manager to respond to show-cause notices on disruptions.
NBCC (INDIA) sells 175 Greater Noida units via e-auction for ₹4.85 billion.
OLA ELECTRIC begins mass deliveries of vehicles powered by its indigenous 4,680 Bharat Cell battery.
ZEN TECHNOLOGIES bags ₹1.20 billion MoD contract to set up India’s first Combat Training Node at Mhow.

MUST READ

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

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