Asia Rallies Despite Soft US Data, Eyes China Inflation

GLOBAL MOOD: Risk-on
Drivers:   China CPI Data, US Employment Data,  and Strait of Hormuz Tensions

Asian markets opened higher on Wednesday, signalling a tentative risk-on mood even as Wall Street struggled with soft retail data and renewed AI-related disruption fears. The resilience suggests investors are looking past near-term US growth concerns and positioning ahead of key macro triggers.

US retail sales were flat in December, missing expectations and reinforcing signs of cooling consumer momentum. Treasury yields fell and the dollar weakened, reflecting softer growth signals. Yet Asian equities drew support from falling US yields and expectations that slowing data could keep the Federal Reserve patient on rates.

Attention now turns to China’s January inflation data, with consumer price growth seen easing and producer prices remaining in deflation. Markets are weighing whether subdued price pressures could open room for policy support.

TODAY’S WATCHLIST
 - US Employment Data
 - Oct-Dec Earnings: Ashok Leyland, Mahindra and Mahindra

THE BIG STORY
Alibaba is stepping deeper into “physical AI” with the launch of RynnBrain, a new model built to help robots understand and interact with the real world. The tech, shown identifying fruit and placing it in a basket, looks simple but sits on heavy AI that blends vision, reasoning and movement. It gives Alibaba a foothold in robotics, an area China sees as strategic as it races the US, and builds on the momentum of its Qwen AI models.

Meanwhile, in old-economy contrast, BP reported in-line October-December profits but halted share buybacks to protect its balance sheet as weaker oil prices bite, highlighting how tech optimism and energy caution are shaping markets side by side.

Data Spotlight
Holiday shopping lost steam in December as bad weather, tariff pressures and sticky inflation weighed on consumers. Retail sales were flat on the month, missing expectations for a modest pickup and cooling sharply from November’s 0.6% rise. Even stripping out autos, sales failed to grow, while the closely watched “control group” that feeds into GDP actually slipped. On a yearly basis, sales growth slowed to 2.4%, down from 3.3% in November, and still lagged inflation, which rose 2.7% in December. Higher-income shoppers continued to spend, but budget-conscious consumers clearly pulled back, putting a soft cap on year-end momentum.

Takeaway
Consumer spending is cooling and no longer keeping pace with inflation, raising fresh questions about growth support from households into early 2026

WHAT HAPPENED OVERNIGHT

• US S&P 500 fell 0.33% to 6,941.81 as weak retail sales and AI disruption fears weighed.
  • Dow rose 0.10% to a record close of 50,188.14, supported by rotation into defensives.
  • LPL Financial slid 8.3%; Charles Schwab fell 7.4%; Morgan Stanley eased over 2%, followed the launch of an AI-driven tax planning tool by Altruist.

 US Treasuries yields declined across the curve on softer economic data.

• • 10-year yield fell over 5 bps to 4.141%; 30-year slipped to 4.781%.
  • Hawkish Fed speeches failed to support yields. 

• US  dollar weakened on signs of slower US growth.
  • Yen strengthened for a second session after Japan election outcome.
  • Dollar Index hovered near 96.80 ahead of payrolls and CPI data. 

• Crude oil prices edged higher amid Strait of Hormuz tensions.
  • Brent crude rose 0.5% to $69.41 per barrel; WTI gained 0.4% to $64.61.
  • Gains followed US advisory urging vessels to avoid Iranian waters.
      

Day’s Ledger

Economic Data

• India M3 Money Supply
• US Employment Data
  
  

Corporate Actions

• Oct-Dec Earnings: Ashok Leyland, Divis Labs, Mahindra and Mahindra, Max Financial, Patanjali Foods

Policy Events

• ECB Cipollone Speech
• ECB Buch Speech
• ECB Schnabel Speech

Tickers to Watch

• Happiest Minds to double hiring in AI business amid skill shortages
• Bhel OFS opens for non-retail investors; govt to sell up to 5% stake
• Reliance Consumer Products acquires health foods maker Southern Health
• Fortis, IHH launch innovation platform for medtech, healthtech startups
• Britannia Q3FY26 results: Profit rises 17% to ₹6.80 billion, revenue up 9.5%
• Dilip Buildcon Q3FY26 net profit surges sevenfold on one-off InvIT gains
• Jubilant FoodWorks Q3 results: Net profit jumps 65.2% on strong growth
• Titan Q3FY26 result: Profit jumps 61% to ₹16.84 billion, revenue up 42%
• Eicher Motors PAT up 21% in Q3 riding on rise in Royal Enfield sales
• Zydus Lifesciences Q3 net profit rises 9% on strong US and India growth

Must Read

• US-Bangladesh trade deal to put India's textile, cotton exports in a spot
• India to remain long-term contributor to Coca-Cola's volume growth
• Power sector reforms central to tackling India's climate finance problem
• DGCA launches safety audit of 14 charter operators; inspections under way
• Trump's Trade Truce Won't Restore the US-India Relationship
  Washington Extracts Its Pound of Flesh from Dhaka
• Bangladesh at Risk: Elections, Radicalism, and India’s Strategic Nerve
• Are SEBI’s Equity Derivatives Rules Restraining Risk or Reshaping the Future
• SC Verdict on Tiger Global: A Case of Substance Over Form
• Who Gets to Decide What Healthcare You Deserve?

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

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