Asian Stocks Rally as AI Optimism Drives Risk On Mood

GLOBAL MOOD: Risk On
Drivers: Tariff Fears Ease, AI Monetisation Optimism, US-Iran nuclear talks

Asian markets led gains on Thursday, tracking a firm Wall Street close as strong earnings from Nvidia and Oracle reinforced the risk on tone. Japan’s Nikkei 225 climbed to a fresh record, underscoring sustained appetite for technology stocks. In the US, the S&P 500 and Nasdaq extended their rally as AI optimism gathered pace and Treasury yields rebounded after tariff rates came in lower than feared. The dollar strengthened, signalling renewed confidence in US assets.

However, the mood was not without caution. A sharp build in US crude inventories pointed to softer demand, while weak German consumer data highlighted fragile growth in Europe. Geopolitical tensions around Iran and Ukraine remain key tail risks for sentiment.

TODAY’S WATCHLIST
 - US Weekly Initial Jobless Claims
 - FOMC Member Bowman Speaks
 - ECB President Lagarde Speech

THE BIG STORY
The CIA has posted Farsi-language recruitment instructions on social media, urging Iranians to contact the agency securely as part of its covert outreach to Iran, China, North Korea, and Russia. This comes amid increased US military presence in the Middle East and looming nuclear talks. President Trump warned against Iran acquiring nuclear weapons in his State of the Union address, while Tehran denies pursuing them. The CIA's public recruitment and US military actions indicate a dual approach by Washington: diplomacy and pressure ahead of a significant risk event.

On the Ukraine front, President Zelenskiy said he and Trump agreed that trilateral talks with Russia in March should culminate in a leaders' summit. Speaking after a phone call that also included US negotiators Steve Witkoff and Jared Kushner, Zelenskiy said the March session was the "only way to resolve all complex and sensitive issues and finally end the war." A separate meeting between Ukrainian and US negotiators is also planned to discuss post-war reconstruction, signalling that both sides are beginning to plan beyond the conflict even as battlefield conditions remain difficult.

Data Spotlight 
The US crude inventories surged by 15.989 million barrels to 435.8 million barrels in the week ended February 20^th, the largest build in three years and nearly nine times the expected 1.8-million-barrel rise with stocks at the Cushing hub also rising by 881,000 barrels. Distillate stockpiles edged up 252,000 barrels against expectations of a 1.6-million-barrel draw, while gasoline stocks fell 1 million barrels, slightly more than the 560,000-barrel draw forecast.

Across the Atlantic, Germany's GfK Consumer Climate Index deteriorated to -24.7 heading into March, missing estimates of -23.1, as economic expectations weakened, willingness to buy deteriorated sharply, and the propensity to save climbed to a record high of 18.9, painting a picture of deeply defensive German households.

Takeaway:
The outsized US crude build is a significant bearish signal for oil, suggesting demand is softening even as geopolitical risk keeps a floor under prices. Germany's record-high-savings rate points to a consumer that remains firmly in defensive mode, adding to concerns about the eurozone's growth trajectory at a time when global trade uncertainty is already weighing on business confidence.

WHAT HAPPENED OVERNIGHT

• US stocks extend rally as AI optimism builds ahead of Nvidia earnings
  • The S&P 500 gained 0.9%, Nasdaq surged 1.4%, and the Dow added 0.7%, extending Tuesday's momentum into a second straight session of gains.
  • Nvidia rose 1.4% ahead of its closely watched earnings report after the bell, the season's most anticipated print.
  • Software stocks led the charge with Palantir jumping 4.2%, Microsoft gained 3%, and Oracle rose 1.2% following a bullish analyst upgrade.
  • Anthropic's new AI integrations continued to reshape sentiment, with markets increasingly viewing AI as a software partner rather than a disruptor.
  • AMD gave back 1.4%, partially unwinding Tuesday's 9% surge, after Meta clarified its multiyear agreement covers 6 gigawatts of AMD GPUs, prompting some profit-taking on valuation concerns.

• US Treasury yields rebound as lower-than-feared tariff rate eases safe-haven demand
  • The 10-year US Treasury yield rose to 4.06%, rebounding from near three-month lows touched earlier in the week as safe-haven demand eased.
  • The pullback in yields was triggered by the blanket tariff coming into effect at 10%, lower than the feared 15% reducing the urgency of the flight-to-safety trade that had dominated Monday and Tuesday.
  • Money markets scaled back Fed rate-cut expectations, adding further upward pressure on yields as the rate path repricing continues.
  • Tuesday's two-year note auction came in broadly in line with the when-issued level, suggesting steady if unspectacular demand at the short end.
  • Markets now eye a $70 billion five-year note auction as the next test of Treasury demand, with results likely to set the tone for yields into the end of the week.

• US Dollar climbs to one-month high at 99 as tariff fears subside
  • The US dollar index rose to 99, its highest level in a month, as markets shrugged off White House policy uncertainty.
  • Trump implemented tariffs at 10% under Section 122, backing away from earlier threats of a 15% rate.
  • Tariff rhetoric was notably muted in Trump's State of the Union address, calming fears of further escalation.
  • Congress is unlikely to extend the Section 122 measures beyond Q4, limiting the long-term tariff threat.
  • Global markets maintained their exposure to dollar-denominated assets, signalling renewed confidence in the greenback despite recent volatility.

• Crude oil prices ended mixed as record inventory build battles geopolitical risk premium
  • Brent crude prices settled slightly lower at $70.49/barrel, pulling back from session highs of $71.58, while WTI edged up 0.29% to $65.61/barrel despite touching intraday lows.
  • A 16-million-barrel surge in US crude stockpiles, the largest weekly build in three years per EIA data initially dragged prices sharply lower.
  • Losses were capped by a geopolitical risk premium as traders monitored escalating naval posturing in the Strait of Hormuz and awaited high-stakes US-Iran nuclear talks in Geneva.
  • The mixed settle reflects a market caught between bearish supply fundamentals and bullish geopolitical risk, with neither force decisive enough to set a clear direction.

Day’s Ledger*

Economic Data

• Euro Consumer Inflation Expectations 
• US Initial Jobless Claims

Corporate Actions

• Oriental Trimex board to consider fund raising 
• QGO Finace board to consider fund raising 

Policy Events

• BoJ Takada Speech
• FOMC Member Bowman Speaks
• ECB President Lagarde Speech 

Tickers to Watch

• Maharashtra GST Department initiates inspection, search at Lupin office
• Anil Ambani's house worth ₹37 villion attached by ED under PMLA
• Coforge wins $158-million UK contract as AI-led demand boosts deal sizes
• Vedanta to tap debt market for second time in FY25 with ₹30 billion bond sale
• Lodha Developers acquires development rights for Malabar Hill property
• HSBC India pre-tax profit increases 10.5% to nearly $1.9 billion
• TCS asks staff to use AI even if it means 'cannibalising' revenue streams

Must Read

• Sitharaman flags fund utilisation gap, cautious on China FDIs
• R&D-linked incentives to drive India's high-end manufacturing push
• Expect $350 billion investment in renewable energy sector by 2030: Pralhad Joshi
• Govt to conduct ₹250 billion bond switch auction on Monday to ease redemptions
• India sustains 7-7.5% growth; Bengal should go maritime: EAC's Sanyal
• No extension on SIM-binding norms, says Telecom Minister Scindia

See you tomorrow with another edition of The Morning Edge.
Have a great trading day

Listing, Legacy and Leverage at Tata Sons

An RBI rule has turned the discussion on N. Chandrasekaran’s extension at Tata Sons into a structural debate. As an Upper Layer NBFC under the RBI’s 2022 framework, Tata Sons could face a listing requirement unless it exits that category — prompting debt reduction and a move to surrender its NBFC licence. With Tata Trusts holding about 66%, the real question is whether the holding company should formally commit to staying unlisted or retain flexibility.

GURUMURTHY R’ writes, should boards lock in a “no listing” promise? Can stewardship at the top coexist with market scrutiny? And if tenure is tied to structural assurances, are governance questions being resolved in the right forum?


(*Compiled from various media sources)