Asian Markets Slide as Tech Rout and AI Fears Deepen Risk-Off Mood

GLOBAL MOOD: Cautiously Risk On
Drivers: Ukraine–Russia talks, Sanctions conditionality, Central bank caution

Asian markets extended losses for a second session on Friday, cementing a risk-off tone as the technology sell-off on Wall Street deepened and volatility spiked across precious metals and cryptocurrencies. 

MSCI’s Asia-Pacific index ex-Japan slid sharply, led by a near-5% plunge in South Korea’s Kospi that briefly triggered a trading halt, highlighting the intensity of de-risking.

Investor unease is being driven by mounting concerns over the profitability of software and AI-exposed firms, elevated capital spending, and signs of labour-market cooling in the US, which are amplifying fears of an earnings reset. 

Safe-haven demand lifted the US dollar and pushed Treasury yields lower, while easing US–Iran tensions dragged oil prices down. Central banks’ cautious signals and mixed geopolitical developments offered little relief, keeping investors defensive ahead of key policy outcomes, including the RBI decision.

TODAY’S WATCHLIST
 - RBI MPC Meet Outcome
 - Oct-Dec Earnings: Bosch, Tata Steel

THE BIG STORY
Diplomatic efforts to de-escalate the war in Ukraine gathered modest momentum as Ukraine and Russia concluded a second round of US brokered talks in Abu Dhabi, resulting in their largest prisoner exchange in five months and an agreement to resume negotiations. While the breakthrough remains limited, the talks marked a rare point of cooperation, with Washington signalling that further sanctions on Russia remain contingent on progress toward a settlement. US Treasury Secretary Scott Bessent said new measures, including against Russia’s shadow oil fleet, remain under consideration depending on the trajectory of peace talks, underscoring a calibrated US approach that keeps economic pressure as leverage rather than a foregone conclusion.

Alongside geopolitical developments, major central banks struck a cautious tone. The ECB held rates steady at the start of 2026, stressing that inflation is broadly on track toward target but warning that global trade risks and geopolitical uncertainty could keep price dynamics uneven. ECB President Christine Lagarde emphasised data-dependence amid elevated uncertainty. In the UK, the Bank of England also kept rates unchanged, though a narrow vote revealed growing internal divisions as inflation cools and labour market slack rises, reinforcing expectations that policy easing may be approaching but will remain gradual.

Data Spotlight
The US labour market data showed fresh signs of cooling toward the end of 2025, though without a sharp deterioration. Initial jobless claims jumped by 22,000 to 231,000 in the final week of January, well above expectations, marking the highest reading in nearly two months. Continuing claims also edged higher to 1.84 million. The increase was largely attributed to temporary disruptions from widespread winter storms, rather than a structural weakening in employment conditions.

At the same time, job openings fell sharply by 386,000 to 6.54 million in December, the lowest level since September 2020, with declines concentrated in professional services, retail, and finance, and across all major regions. Despite weaker labour demand, hiring and separations remained broadly unchanged, while quits rose modestly to a six-month high, suggesting workers still retain some confidence in job mobility.

Takeaway: US labour demand is clearly softening, with job openings at multi-year lows. Rising claims appear weather-related, reinforcing a “low-hire, low-fire” labour market rather than a rapid slowdown.

WHAT HAPPENED OVERNIGHT

• US tech stocks selloff drags markets lower
  • US stocks ended down with Nasdaq falling to its lowest level since November as heavyweight tech stocks came under pressure.
  • Alphabet slipped 0.6% after flagging up to $185bn in AI-related capex for 2026, reviving margin concerns.
  • Microsoft dropped 5%, extending recent losses across mega-cap technology.
  • Palantir slid 6.8% and Oracle fell 7% amid fears of rising AI competition and spending intensity.
  • Broader market sentiment weakened as technology losses outweighed gains elsewhere.
• US Treasury yields slide on mounting labour market weakness
  • The benchmark US 10-year Treasury yields fell to around 4.2%, its lowest level in nearly three weeks, as a string of softer labour market indicators strengthened expectations of Federal Reserve rate cuts this year.
  • JOLTS data showed job openings dropping to a five-year low in December, while the Challenger report pointed to the highest January job cuts since 2009, signalling growing stress in hiring conditions.
  • The data reinforced market pricing for multiple Fed rate cuts in 2026, with a first move still expected in June and a second potentially in September.
• US Dollar firms on risk aversion, BoE surprise
  • The US dollar index strengthened for a second consecutive session, hitting a two-week high as volatility returned to global equities and risk appetite softened.
  • Sterling weakened sharply after the Bank of England voted by a narrow margin to keep interest rates unchanged, providing additional support to the dollar.
  • The dollar index rose 0.18% to 97.85, its highest level since January 23, as investors sought safety amid choppy markets.
  • Ongoing assessment of the US earnings season, now roughly halfway through, also contributed to more defensive positioning in currency markets.
• Crude oil prices slide as US–Iran talks ease supply fears
  • Brent crude prices fell sharply in volatile trading after the US and Iran agreed to hold nuclear talks in Oman, reducing near-term concerns over disruptions to Iranian crude exports.
  • Brent crude futures declined $1.91, or 2.75%, to settle at $67.55 per barrel while US West Texas Intermediate fell $1.85, or 2.84%, to $63.29 per barrel.
  • The pullback followed recent gains driven by geopolitical risk, with markets reassessing the likelihood of additional sanctions tightening or military escalation ahead of Friday’s talks.

Day’s Ledger

Economic Data

• India Bank Credit-Deposit Data
• India FX Reserves  Data

Corporate Actions

• Oct-Dec Earnings: Bosch, Kalyan Jewellers, MRF, Shree Cements, Siemens, Tata Steel

Policy Events

• RBI MPC Meet Outcome
• Fed Balance Sheet
• BoJ Masu Speech
• ECB Cipollone Speech

Tickers to Watch

• LIC's Q3 net profit up 17% in Q3 due to higher premiums, investment income
• Bharti Airtel Q3FY26 results: Net profit falls 55% to ₹6,630 crore
• TaMo PV posts net loss as JLR cyber incident drags Q3FY26 performance
• PVR INOX net profit rises 1.6-fold, Ajay Bijli says momentum is back
• Max Healthcare Q3 PAT up 26%, revenue rises 10% despite margin compression
• Power Finance Corp Q3FY26 results: Net profit rises 6% to ₹8,212 cr
• NCLT admits class action by minority shareholders against Jindal Poly Films
• Oberoi Realty tops bid for Railway land in Mumbai's Bandra for ₹5,400 cr

Must Read

• Tariff relief renews US buyers' interest in Indian toy, game makers
• India-US trade deal to cut tariffs to 18% after joint statement: Goyal
• We framed this Budget on a larger plank, not based on any one incident: FM
• Venezuela long-standing energy partner, India open to crude sourcing: MEA
• India, US to sign first tranche of formal trade agreement by mid-March
• India-US trade deal lifts great deal of uncertainty, say FinMin officials
  
  

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

Liquidity Is Plenty, Confidence Is Scarce

Despite a deep easing cycle and record liquidity infusion, India’s financial conditions remain tight. Why?

Emkay Global Financial Services Chief Economist Madhavi Arora writes, markets aren’t reacting to rates—they're reacting to risk. Transmission has stalled, bond spreads are rising, and banks are hoarding buffers instead of lending.