Asia, Global Markets Gain After Fed Move but Geopolitics Limits Sentiment

GLOBAL MOOD: Cautiously Risk-On
Drivers: Fed Cut Rates, Ukraine Peace Deal,

Asian and global markets are leaning cautiously risk-on following the Fed’s rate cut, with investors welcoming the dovish tilt while acknowledging the Fed’s signal of a potential pause in January. The mood is supported by softer US yields, a weaker dollar, and optimism around near-term easing.

However, geopolitical tensions including the US seizure of a Venezuelan tanker and ongoing uncertainty in Ukraine peace negotiations are capping enthusiasm.

TODAY’S WATCHLIST

• US Trade Data
• India AMFI Data
• US Jobless Claims

THE BIG STORY

The Federal Reserve delivered a quarter-point rate cut on Wednesday, but with policymakers sharply split, the central bank signalled it is unlikely to lower borrowing costs again in the near term. With the labour market softening, inflation still “somewhat elevated,” and the economy projected to strengthen to 2.3% growth in 2026, the Fed added language historically used to indicate a pause.

New projections showed only one more cut expected next year, matching September’s outlook but masking deep internal disagreement, a divide widened by incomplete economic data following the six-week government shutdown and uncertainty surrounding President Trump’s evolving economic agenda and the AI-driven investment boom. Policymakers now expect inflation to ease toward 2.4% by end-2026, with unemployment holding near 4.4%, a combination that helps calm earlier fears of stagflation. Markets, however, remain more dovish than the Fed, still pricing in two rate cuts next year, setting the stage for potential tension between policymakers and investor expectations in early 2026.

Data Spotlight
The US budget picture improved sharply in November, with the federal government posting a $173.3 billion deficit, less than half the $366.8 billion gap recorded a year earlier. Revenues jumped 11.4% to $336.0 billion, boosted by stronger collections of individual income taxes, social insurance contributions and customs duties gains largely driven by seasonal and timing-related factors. Meanwhile, federal outlays declined 23.8% to $509.3 billion, with Social Security, Medicare and defence remaining the biggest spending categories. Several benefit payments were shifted due to calendar effects, helping suppress November’s total outflow.

In energy markets, the latest EIA report showed US crude inventories fell by 1.812 million barrels for the week ending December 5, a smaller draw than markets expected. Stocks at Cushing rose by 308,000 barrels after four straight weekly declines. Product inventories surged, with gasoline up 6.397 million barrels and distillates up 2.502 million barrels, both pointing to soft demand alongside seasonal stock rebuilding.

Takeaway: The budget deficit narrowed significantly on timing effects, not underlying fiscal tightening. Oil markets saw mixed signals: a modest crude draw but large product builds that may pressure near-term prices.

WHAT HAPPENED OVERNIGHT

• US stocks rise as Fed cuts rates and investors bet on more easing
  • US stocks finished higher on Wednesday after the Federal Reserve delivered a 25-bps rate cut, as expected.
  • Dow ended up by 1.1%, S&P 500 rose 0.7%, Nasdaq gained 0.4%, with the Nasdaq reversing early losses after Powell ruled out rate hikes and discussed whether to pause or cut “a little” or “more than a little.”
  • Amazon +1.7% after announcing a $35 billion India investment, while JPMorgan +3.2% supported financials.
  • Microsoft –2.8% lagged after revealing a $17.5 billion investment in India over four years. 

• US Treasury yields ease as Fed but lands but signals hint at a pause
  • The 10-year US Treasury yield slipped to 4.15%, retreating from a near three-month high, after the Fed delivered the expected 25 bps rate cut.
  • A subtle shift in the Fed’s statement mentioning “the extent and timing of additional adjustments” suggested policymakers may pause rate cuts in January while awaiting clearer data on growth and inflation.
  • Fed projections turned more upbeat, lifting the 2025 GDP forecast to 2.3% from 1.8% and nudging 2027 growth to 2%.
  • Inflation projections were revised lower, though still above target: 2025 at 2.5% from 2.6% and 2026 at 2.4% from 2.6%.

• US Dollar drops as Fed Cuts Rates 
  • The dollar index slid to 98.6, its lowest since 20 October, after the Fed delivered a widely expected 25 bps rate cut.
  • The greenback weakened against the euro, yen, and Swiss franc as markets digested a more cautious Fed tone.
  • Fed Chair Powell said the next move is unlikely to be a hike, stressing policymakers are debating whether to pause, trim rates “a little,” or cut “more than a little.”
  • A key shift in the Fed statement referencing the “extent and timing of additional adjustments” signalled a probable pause in January.
  • The Fed also upgraded its growth outlook, but projected only one more cut in 2026, reinforcing a softer dollar bias.

• Crude oil prices rise on US Seizure of Venezuelan Tanker
  • Brent crude prices settled at $62.21 (+0.4%), while WTI crude closed at $58.46 (+0.4%).
  • US officials confirmed the seizure of an oil tanker off the coast of Venezuela, prompting fresh supply concerns.
  • The tanker’s name and exact interception location were not disclosed, adding to uncertainty and lifting the geopolitical risk premium in oil markets. 

DAY’S LEDGER

ECONOMIC DATA

• US Trade Data
• India AMFI Data
• US Jobless Claims
• OPEC monthly Report 

CORPORATE ACTIONS

• Ashiana Housing board to consider fund raising 
• Dugar Sugar board to consider fund raising 
• Hemo Organic board to consider fund raising 
• IIFL Finance board to consider fund raising 
• Spandana Sphoorty board to consider fund raising 
• Suryo Foods board to consider fund raising  

POLICY EVENTS

• Euro Group Meeting
  

TICKERS TO WATCH

• Vedanta to invest ₹1 trillion in Rajasthan to double production: Anil Agarwal
• Adani Enterprises rights issue oversubscribed; to raise about ₹249.30 billion
• SBI raises data centre exposure target to ₹40 billion crore for FY26
• Ashok Leyland launches high-efficiency P15 and H4 engines at EXCON 2025
• Volkswagen Group rolls out VRS for India plant workers; ops to continue
• Jindal Jhajjar Power to raise up to ₹21 billion cr debt to acquire thermal plant
• Transition VC closes oversubscribed ₹7 billion crore debut fund at final close

MUST READ

• Amazon to invest over $35 billion in India by 2030, betting big on AI
• Banks step up borrowing via CDs amid deposit tightness; raise ₹778.75 billion
• T'gana govt setting up ₹10 billion crore fund to support startups: CM Reddy
• India gas consumption falls 7.5% in Jan-Oct amid monsoons, cheaper fuels
• China pushes India-US closer; tariffs, Pakistan strain ties: D Jaishankar
• Top Indian arms makers hold meetings in Russia on potential joint ventures
• India, Brazil sign key naval MoU to boost Scorpene submarine support
• India gas consumption falls 7.5% in Jan-Oct amid monsoons, cheaper fuels
• Trump Plans Final Interviews With Fed Chair Candidates in Coming Days
  
  

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day

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