Asia Turns Risk-On as US Tariff Cut Lifts Korea Autos Despite Crypto Drag

GLOBAL MOOD: Risk-on
Drivers: Fed Cut Bets, Ukraine Peace Framework

Asia traded in a risk-on mood as South Korean shares led gains after US auto tariffs were cut retroactively, lifting Hyundai and Kia. Regional sentiment improved despite Wall Street weakness triggered by a sharp bitcoin drop ahead of key Fed speeches

TODAY’S WATCHLIST
 - Fed Chair Powell Speech
 - Fed Bowman Speech

THE BIG STORY
European leaders gathered around Ukrainian President Volodymyr Zelenskiy on Monday, signalling firm support after US–Ukraine talks moved to revise a peace proposal that Kyiv and its allies initially viewed as overly favourable to Russia. Zelenskiy met French President Emmanuel Macron in Paris before joining a virtual discussion with leaders from the UK, Germany, Italy, Poland and the EU. He reiterated that Ukraine’s negotiating priorities remain safeguarding sovereignty, securing long-term security guarantees, and avoiding any settlement that rewards Russian aggression while acknowledging that territorial issues remain the most difficult. Zelenskiy said he hopes to speak directly with President Donald Trump after US special envoy Steve Witkoff briefs the Kremlin this week in Moscow.

In a separate development, the UK and United States announced a new agreement that guarantees a 0% tariff on all UK medicines exported to the US for at least three years. In return, UK pharmaceutical companies will increase investment and job creation in the US, while the UK government has pledged a 25% boost in spending on new medical treatments its largest increase in over two decades. Both governments hailed the deal as a mutually beneficial step that strengthens transatlantic cooperation. 

Data Spotlight
US manufacturing shrank for the ninth consecutive month in November, as factories continued to struggle with weak demand and rising input costs tied to import tariffs. The latest ISM survey showed manufacturers in the transportation equipment sector linking layoffs and structural changes directly to President Trump’s tariff regime, noting shifts toward offshore production and permanent staff reductions. The ISM Manufacturing PMI fell to 48.2 from 48.7 in October, marking another month of contraction in a sector that accounts for just over 10% of the US economy. While some respondents suggested activity may stabilise following the end of the government shutdown, overall factory conditions remain subdued.

Takeaway:
Manufacturing weakness deepened in November as tariffs continued to pressure orders, costs, and hiring. Any post-shutdown stabilisation is likely to be modest, keeping factory activity firmly in contraction.

 

WHAT HAPPENED OVERNIGHT

• US stocks ended down on Monday as bond yields jump
  • US stocks closed modestly lower on Monday as a jump in Treasury yields pressured sentiment ahead of next week’s Fed meeting.
  • Fresh data showed tariffs continue to drag on US manufacturing, reinforcing concerns about slowing industrial activity.
  • Synopsys jumped 4.9% after Nvidia disclosed a $2 billion investment in the chip-design software firm.
  • Strategy fell 3.3% after plunging as much as 12%, slashing its 2025 earnings forecast amid a weak bitcoin performance. 

• US Treasury yields rise on global bond sell-off
  • The 10-year US Treasury yield rose nearly 7 bps to 4.08%, a two-week high, extending Friday’s rebound.
  • Global bond pressure intensified after Japanese 10-year yields hit their highest level since 2006 on expectations of a Bank of Japan rate hike this month.
  • Higher JGB yields may prompt Japanese investors to repatriate capital, reducing demand for US Treasuries.
  • A heavy slate of corporate bond issuance, including from Merck & Co, added to selling pressure in the Treasury market. 

• US Dollar weakens on dovish bets
  • The Dollar index slipped below 99.2, extending November’s 0.3% decline as markets priced in chance of a 25 basis points Fed cut next week.
  • Trump signalled he has selected the next Fed Chair, with Kevin Hassett widely seen as the leading candidate, reinforcing expectations of a dovish shift.
  • Traders awaited a heavy slate of delayed data, including the September PCE report, while ISM manufacturing contracted for a ninth month. 

• Crude oil prices rise on geopolitical risks
  • Brent crude prices climbed over 1% on Monday as geopolitical risks flared, with Ukraine launching new drone attacks and the US closing Venezuelan airspace.
  • Support also came from OPEC’s decision to keep output unchanged for Q1 2026, easing fears of additional supply.
  • Brent prices settled at $63.17 up 1.27% and WTI ended at $59.32 up 1.32%.

Day’s Ledger

Economic Data

• Euro Nov Inflation Rate Flash
• Euro Oct Unemployment Rate
• Euro Nov CPI Flash
• India State Borrowing Auctions 

Corporate Actions

• Modison to mull dividend 

Policy Events

• Fed Chair Powell Speech
• ECB Buch Speech
• Fed Bowman Speech 

Tickers to Watch

• DREAMFOLKS SERVICES to acquire 60.24% stake in Dubai's Easy to Travel
• Govt to divest up to 6% stake in BANK OF MAHARASHTRA, eyes ₹2,600 cr
• IRB INFRASTRUCTURE approves sale of Gandeva Ena project for ₹513 crore
• Anil Ambani moves SC against SBI classification of his account as fraud
• TILAKNAGAR INDUSTRIES completes ₹3,442 crore Imperial Blue acquisition
• RAYMOND REALTY launches ultra-luxury BKC project, targets ₹2K cr revenue
• May have to discontinue small cars if CAFE targets unjust: MARUTI 

Must Read

• Here Comes the Sun
  
• Stranger Things: India’s High Real GDP Hides More Than it Tells
  
• The Blazing Growth Print India Simply Doesn’t Feel
  
• Domestic PV industry grows 20.7% in November on lower post-GST prices
  
• Near-term margins for cement companies to remain under pressure
  
• Govt does not give LIC directions on its investment decisions: FinMin
  
• Where Do Fed Voters Stand on a December Rate Cut?
  
• Bitcoin Falls as Prospect of Rate Rise in Japan Spooks Investors

 

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day

Why OMOs Matter in This MPC 

India’s GDP print may look like a dream headline, but the monetary plumbing tells a very different story. 

Liquidity has slipped into its tightest zone in months — squeezed by FX intervention, forward-book maturities, and seasonal currency demand — just as credit needs rise and state borrowing peaks.

Madhavi Arora writes, this is why the real action in this MPC won’t be the repo rate. It will be the RBI’s liquidity stance.

Without front-loaded OMOs, banks will chase deposits at higher costs, transmission will weaken, and term premia will stay sticky. A calibrated rate cut may come eventually, but durable liquidity is what will keep credit flowing and yields anchored through a supply-heavy quarter.