Asian Markets Slip as Tech Rout Deepens, Risk-Off Mood Persists

GLOBAL MOOD: Risk off
Drivers: Mixed us Economic Data, US-Iran Tension,

Asian markets opened mostly lower on Thursday, extending a risk-off tone as the technology-led sell-off on Wall Street gathered pace and spilled into regional equities. Investor sentiment remained fragile amid renewed concerns over stretched tech valuations, heavy AI-related capital spending and fears that generative AI could erode established software business models. South Korea bore the brunt of the move, with the Kospi sliding sharply as chip majors Samsung and SK Hynix fell steeply. 

Cryptocurrencies also weakened, reinforcing the broader de-risking trend. Geopolitical uncertainty added to caution, with US–Iran nuclear talks set to resume against a tense West Asia backdrop, keeping oil prices elevated and volatility high. Firmer US Treasury yields and soft private-sector hiring data further complicated the outlook, leaving markets defensive ahead of key central bank decisions globally.

TODAY’S WATCHLIST

• BoE Interest Rate Decision
• ECB Interest Rate Decision
• RBI MPC’s Monetary Policy Meeting Day-2
• Fed Cook Speech
• Fed Bostic Speech
• Oct-Dec Earnings: Airtel, Bharti, Hero MotoCorp, IOC, LIC, Tata Motors PV

THE BIG STORY
The United States and Iran have agreed to resume formal nuclear talks in Oman on Friday, reviving fragile diplomacy after weeks of uncertainty and marking the first direct negotiations since May. While both sides confirmed the meeting, expectations remain narrow and risks elevated. Washington is pressing Tehran to halt uranium enrichment, curb its ballistic missile programme and scale back support for regional proxies, while Iran has signalled it is willing to discuss only its nuclear activities.

The renewed talks come against a backdrop of heightened regional tension, with Israeli shelling and airstrikes killing at least 24 Palestinians in Gaza, threatening to undermine an already fragile ceasefire.

Adding to the geopolitical complexity, President Donald Trump held calls with both Chinese President Xi Jinping and, indirectly through parallel diplomacy, Russia, underscoring growing divisions among major powers over Iran and the West Asia. Trump highlighted trade dimensions in his conversation with Xi, including China’s purchases of US energy, as markets weighed whether diplomacy can contain risks or whether negotiations could still give way to military escalation.

Data Spotlight
The US ISM Services PMI held steady at 53.8 in January 2026, surpassing expectations of 53.5 and indicating ongoing sector growth. Business activity increased to 57.4, while new orders slipped to 53.1, employment fell to 50.3, and supplier deliveries rose to 54.2. Inventories dropped to 45.1, backlogs remained weak at 44, and prices rose to 66.6. ISM Chair Steve Miller noted more comments on tariff impacts and uncertainty, with fuel prices down and attention needed on sustained price increases amid geopolitical tensions.

The S&P Global US Services PMI rose to 52.7 in January, matching expectations and marking almost three years of continued growth ahead of other major economies. The Composite PMI increased to 53.0, supported by stronger output and new business, though employment gains were minimal and confidence dropped.

Private-sector hiring added only 22K jobs (vs. 37K in December and 48K forecast), with healthcare leading at 74K. Financial activities, construction, trade/transport/utilities, and leisure/hospitality saw modest increases, while professional/business services and manufacturing lost jobs.

Takeaway:
US services PMIs confirmed solid expansion with rising activity and output, though softening new orders, employment, and rising tariff concerns signal potential headwinds. Private hiring weakened broadly, highlighting healthcare as the bright lone spot amid losses in key sectors like professional services.

WHAT HAPPENED OVERNIGHT

• US stocks slides as AI valuation concerns resurface
  • US stocks ended lower, led by sharp declines in technology and semiconductor stocks amid worries that the AI rally may be peaking.
  • Advanced Micro Devices plunged 17% after issuing a weaker-than-expected revenue outlook and flagging tougher competition with Nvidia.
  • Nvidia fell 3.4%, while the Philadelphia Semiconductor Index dropped 4.4%, weighing on broader market sentiment.
  • Palantir slid nearly 12%, reversing the prior session’s rally that followed strong quarterly sales.
  • Alphabet fell almost 2% ahead of earnings but rebounded about 2% after hours after announcing aggressive ramp-up in AI-related spending.

• US Treasury yields firm as issuance guidance, strong data outweighs labour softness
  • The benchmark US 10-year Treasury yields rose to around 4.28%, hovering near the five-month high of 4.3% seen on January 20.
  • Yields moved higher after the US Treasury reaffirmed its issuance guidance, keeping a larger share of borrowing in short-term bills rather than longer-dated bonds to manage the cost of elevated interest rates.
  • The decision ran counter to expectations that the Treasury might reduce long-duration supply to help cap long-term yields and support President Trump’s push to rein in mortgage rates.
  • Strong ISM PMI data pushed yields higher, highlighting ongoing economic strength.
  • Meanwhile, ADP employment figures continued to signal slow hiring, an important indicator as delays persist for the official January jobs report.

• US Dollar steadies as data delays, policy divergence shape FX moves
  • The US dollar index hovered around 97.5 on Wednesday, holding a modest rebound after sliding to a near six-year low of 96 in late January.
  • Markets continued to assess an uncertain Federal Reserve rate path, with the postponement of key US labour data placing added focus on the ADP report, which missed expectations and reinforced the view of a low-hiring domestic backdrop.
  • The dollar held steady despite weak US jobs data, as falling eurozone inflation raised expectations of ECB rate cuts, capping gains for the euro.
  • The yen stayed weak as reports suggested Japan's central bank may not intervene in markets if Prime Minister Takaichi is re-elected and expands fiscal policy.

• Crude oil prices jump 3% on renewed US-Iran tension
  • Brent crude prices surged 3% after reports suggested planned US-Iran talks on Friday could collapse.
  • Brent futures rose 3.16% to $69.46 a barrel, while WTI gained 3.05% to settle at $65.14.
    
  • Sentiment turned bullish after Axios reported the US rejected Iran’s request to change the location of the talks.
    
  • Fears of a diplomatic breakdown revived concerns over potential supply disruptions from Iran, supporting prices.
    
    

Day’s Ledger

Economic Data

• US Initial Jobless Claims

Corporate Actions

• Oct-Dec Earnings: Astral, Bharti Airtel, Bharti Hexacom, FSN E-Commerce, Godrej Properties, Hero MotoCorp, Hitachi Energy, IOC, LIC, Max Health, Mazagaon Doc, Page Ind, PFC, Rail Vikas, Suzlon Energy, Tata Motors PV
• CL Educate board to consider fund raising 
• Suryo Foods board to consider fund raising 

Policy Events

• Fed Cook Speech
• BoE Interest Rate Decision
• ECB Interest Rate Decision
• Fed Bostic Speech

Tickers to Watch

• CCI orders investigation into IndiGo for abuse of dominant position
• RCom fraud case: Supreme Court directs ED to constitute probe team
• Marico signs deal to buy majority stake in Cosmix Wellness for ₹2.26 billion
• Zydus Lifesciences gets US FDA approval for generic diabetes drug
• HCLTech to streamline aviation maintenance operations for Hong Kong's HAESL
• Rustomjee Q3FY26 results: Profit falls 78% on sharp revenue decline
• Trent Q3FY26 results: Net profit rises 3.1% on steady fashion growth
• Emami Q3FY26 results: Net profit rises 14.5% on volume, margin growth
• Tata Power Q3 net profit drops 4%, scouting sites for nuclear SMRs
• TMB Q3 results: Net profit up 14% at ₹3.42 billion, asset quality improves
• Medanta Q3FY26 PAT falls 33.5% on labour laws, Noida hospital costs
• Metropolis Q3FY26 results: Profit jumps 32%, revenue rises nearly 26%

 Must Read

• India-US trade deal to spur investments, says Sebi chairman Pandey
• Kremlin says India's oil diversification 'nothing new' amid US trade deal
• Outcome Budget data raises questions on returns from government capex
• Govt likely to clear seven proposals worth ₹11,000 crore under ECMS
• Washington Post to cut one-third of staff as company begins major layoffs
• Top Republican Senator Says Fed’s Powell Didn’t Commit a Crime
• Distressed Software Loans Swell by $18 Billion in Span of Weeks
  
  

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

Incremental Ambition in an Age Demanding Structural Reset

At a time when India’s economy demands structural resets, the Union Budget 2026–27 opts for consolidation over transformation. It signals discipline, selective ambition, and strategic autonomy, but falls short on institutional reform.

Former Finance Secretary Arvind Mayaram’s writes the Budget advances key sectors like semiconductors, green energy, and logistics, yet skirts deeper issues: unpredictable pricing regimes, fragile social protection, and a weakened Centre–State fiscal compact. In an era of permanent volatility, managing arithmetic is no longer enough, what we need is economic statecraft.