Asia Rebounds as Markets Turn Risk-On After Trump Softens Greenland Stance

GLOBAL MOOD: Risk-On
Drivers: Tariff Retreat, Greenland Deal Hopes, Geopolitical De-escalation

Asia-Pacific markets shifted back into a risk-on mode after US President Donald Trump eased concerns around Greenland, dialing back tariff threats against Europe and ruling out the use of force. The softer tone, reinforced by comments at the World Economic Forum pointing to a framework deal with NATO, helped calm fears of a renewed transatlantic trade conflict. 

Regional equities rebounded alongside Wall Street, snapping a multi-day losing streak as investors rotated back into risk assets. Falling US Treasury yields and a steadier dollar reflected reduced geopolitical tail risks, even as mixed economic data kept expectations of policy caution intact.


TODAY’S WATCHLIST

• BoJ Monetary Policy Meeting
• US Core PCE Price Index
• Oct-Dec Earnings: Adani Energy, Coforge, InterGlobe

THE BIG STORY
US President Donald Trump dialed back weeks of escalating rhetoric on Greenland, ruling out the use of force and stepping away from tariff threats that had unsettled markets and strained transatlantic relations. Speaking from Davos after meeting NATO Secretary General Mark Rutte, Trump said a framework deal was taking shape that could address US security concerns in the Arctic while avoiding punitive trade measures against Europe. The retreat eased fears of a renewed trade war and a deeper rift with European allies, which had driven a sharp risk-off move earlier in the week.

Trump said the prospective agreement would secure long-term cooperation on missile defence and access to critical minerals in Greenland, while countering Russian and Chinese influence in the region. Separately, Trump signalled optimism on geopolitics beyond Europe, saying he would meet Volodymyr Zelenskiy in Switzerland and that both Zelenskiy and Vladimir Putin appeared ready to move toward a deal to end the nearly four-year war in Ukraine. Markets welcomed the softer tone, viewing it as a reduction in immediate geopolitical and trade tail risks.

Data Spotlight
Japan’s exports rose 5.1% YoY to a record 10.41 trillion yen in December 2025, extending gains for a fourth straight month on solid year-end foreign demand. However, momentum cooled from November and fell short of expectations (6.1%), suggesting external demand is growing but at a moderate pace.

US pending home sales slumped 9.3% MoM in December, the steepest fall since April 2020, sharply reversing November’s 3.3% rise and far worse than the expected 0.3% decline. The drop snapped a four-month recovery streak, with broad-based weakness across all regions, led by the Midwest and West. On a YoY basis, sales were down 3.0%.

Takeaway: Global data paint a mixed picture—Japan’s exports remain supportive for growth but show signs of slowing, while the sharp pullback in US pending home sales highlights persistent stress in the housing sector, reinforcing concerns that higher rates continue to weigh on domestic demand.

WHAT HAPPENED OVERNIGHT

• US stocks rebound as Greenland tensions ease
  • US stocks jumped sharply as President Donald Trump ruled out military force over Greenland at the World Economic Forum, easing geopolitical anxiety after the prior session’s selloff.
  • The S&P 500 rose 1.4%, the Dow Jones Industrial Average gained 1.4%, and the Nasdaq 100 climbed 1.6%, supported by a broad recovery across risk assets.
  • Semiconductors led the rebound, with Advanced Micro Devices, Intel, and Micron Technology surging between 6.6% and 11.7%.
  • Netflix fell 2.2% after flagging higher content and deal-related costs, while Johnson & Johnson was flat despite issuing stronger guidance.

• US Treasury yields ease as tariff risks fade and policy focus shifts
  • The benchmark 10-year US Treasury yields ended a volatile session lower, with the 10-year yield down 4.2 bps to 4.252%, while the 2-year held steady at 3.596%.
  • Bond yield fell as markets reacted positively to President Donald Trump's decision to drop tariff threats related to Greenland, noting that a deal was underway.
  • Sentiment was further supported by signs the Supreme Court is unlikely to back Trump’s effort to remove Fed Governor Lisa Cook, easing concerns over direct political interference at the central bank.
  • Trump said he is closing in on a decision to replace Fed Chair Jerome Powell, keeping some policy uncertainty priced into longer maturities.

• US Dollar rebounds as Greenland tensions ease
  • The dollar strengthened after President Trump said he had reached a framework with NATO on Greenland and backed away from imposing tariffs on allied nations.
  • The US dollar index pared early losses to trade around 98.6, reflecting cautious optimism as investors reassessed political risk.
  • Comments at the World Economic Forum in Davos ruling out military action reduced fears of a broader trade and geopolitical escalation.
  • The easing of tensions helped reverse a recent selloff in US assets, supporting the greenback against the euro and Swiss franc.

• Crude oil prices edge higher on Kazakhstan outages, Venezuela supply lag
  • Brent crude prices settled at $65.24 (+0.5%); WTI closed at $60.62 (+0.4%).
  • Temporary shutdowns at two major oil fields in Kazakhstan tightened near-term supply expectations.
  • Venezuela's exports remain low, highlighting slow output recovery despite policy changes.

Day’s Ledger

Economic Data

• Japan Balance of Trade
• India M3 Money Supply 
• US Jobless Claims Data
• US Core PCE Price Index
• Euro Consumer Confidence Data

Corporate Actions

• Oct-Dec Earnings: APL Apollo, Adani Energy, Adani Total, Coforge, DLF, Indian Bank, InterGlobe, Mphasis, Premier Energies

Policy Events

• BoJ 2-day Monetary Policy Meeting Begins

Tickers to Watch

• Deepinder Goyal steps down as CEO of Eternal Group; Dhindsa to take charge
• Persistent Systems looks to grow in Europe as macro headwinds linger
• Vedanta creates ₹2,500 crore employee wealth through ESOPs over 5 years
• United Spirits upbeat on price-mix support despite Maharashtra volume hit
• Allcargo names Vaishnav Shetty Deputy MD as part of leadership transition
• Tata Communications designates new MD & CEO as Q3 profit rises 54%
• Dr Reddy's Q3 PAT down 14% Y-o-Y on low Lenalidomide sales in US
• Jindal Stainless Q3 profit jumps 26.6% as domestic demand offsets exports
• Bank of India Q3FY26 profit rises 7.47% on strong non-interest income
• HPCL net profit grows 57.7% in Q3 on higher GRMs, LPG compensation
• Canara HSBC Life Insurance Q3 profit slips 5.7% on higher expenses

Must Read

• DoT de-licenses lower 6 GHz band to boost next-generation Wi-Fi services
• SC rules steel import curbs apply only from gazette date, grants MIP relief
• India's financial assets & liabilities logs strong growth in FY24: RBI
• Budget may hike railways' allotment to ₹2.7 trn, meet 'minimum requirement'
• India set to become 3rd largest economy by 2028, says Gita Gopinath
• India 'stopped' buying oil from Russia, claims US Treasury Secretary
• Greenland part of North America, our territory: Trump at Davos

 

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

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