US–India Trade Deal Sparks Risk-On Rally Across Asia

GLOBAL MOOD: Risk on
Drivers: US–India trade deal, Tariff rollback, Energy realignment, Iran nuclear talks

Markets shifted decisively into a risk-on mode after the US–India trade deal announcement sparked a sharp improvement in sentiment across Asia. President Donald Trump’s confirmation of immediate tariff cuts lifted expectations of smoother trade flows and strategic realignment, triggering a powerful early reaction in Indian assets, with GIFT Nifty surging as much as 800 points overnight, even as the implied open rates are awaited.

Optimism was reinforced by stronger-than-expected US manufacturing data, signalling resilience in global growth, and a rebound in US equities led by large-cap technology stocks.

TODAY’S WATCHLIST

• Oct-Dec Earnings: Adani Enterprises, Adani Ports, Bajaj Finance
• RBA Interest Rate Decision

THE BIG STORY
US President Donald Trump announced a breakthrough trade deal with India, sharply reducing US tariffs on Indian goods to 18% from 50% in exchange for India halting purchases of Russian oil and lowering trade barriers for American firms. The agreement, announced after a call with Prime Minister Narendra Modi, also commits India to significantly higher purchases of US energy, technology, agricultural and other products, including more than $500 billion in US energy imports over time. A White House official confirmed that Washington will rescind an additional punitive 25% duty imposed over India’s Russian oil purchases, easing a major bilateral friction point. The announcement helped lift market sentiment, reinforcing optimism around semiconductors and AI-linked stocks.

Geopolitical risk, however, remained in focus as Iran and the United States confirmed plans to resume nuclear talks on Friday in Turkey, with US envoy Steve Witkoff set to meet Iranian Foreign Minister Abbas Araqchi in Istanbul. President Trump warned that failure to reach a deal could have serious consequences, noting that US warships are moving toward the region. While the restart of diplomacy offered some relief, the combination of trade realignment and lingering Middle East tensions kept investors alert to headline-driven volatility.

Data Spotlight
US manufacturing activity rebounded sharply at the start of 2026, with the ISM Manufacturing PMI unexpectedly jumping to 52.6 in January from 47.9 in December, well above forecasts of 48.5. This marked the first expansion in 12 months and the strongest reading since 2022. The improvement was broad-based, led by a surge in new orders (57.1 vs 47.4) and production (55.9 vs 50.7), while employment (48.1 vs 44.8) and inventories (47.6 vs 45.7) remained in contraction but showed clear improvement. Supplier deliveries (54.4 vs 50.8) also pointed to rising activity, while price pressures were little changed at elevated levels.

This recovery was reinforced by the S&P Global US Manufacturing PMI, which rose to 52.4 in January from 51.8 in December, above the preliminary estimate of 51.9. The survey signaled a firmer, above-trend expansion, with output posting its strongest rise since August and one of the fastest growth rates since mid-2022.

Takeaway:
US manufacturing has entered 2026 on a much stronger footing than expected, supporting the narrative of economic resilience. However, the rebound may be partly front-loaded and seasonal, suggesting the sustainability of the upturn will depend on demand conditions and how tariff-related cost pressures evolve.

WHAT HAPPENED OVERNIGHT

• US stocks rebound as tech leads risk recovery
  • US stocks extended their recovery, with the S&P 500 up ~0.8%, the Dow gaining ~1.2%, and the Nasdaq 100 rising close to 1%.
  • Sentiment improved as last week’s sharp selloff in precious metals and cryptocurrencies continued to unwind, reducing near-term risk aversion.
  • Large-cap technology and growth stocks led gains, with Apple up over 3%, AMD climbing nearly 5%, and Micron surging more than 5%.
  • Alphabet and Amazon traded firmly higher ahead of earnings later in the week, keeping attention on big-tech leadership.
  • Oracle edged lower after recent gains tied to its $50 billion capital-raising plan, while Nvidia slipped around 2% amid uncertainty over its stalled $100 billion OpenAI investment.

• US Treasury yields rise as markets price in hawkish Fed leadership
  • The benchmark US 10-year Treasury yields rose above 4.28% on Monday, remaining close to the five-month high of around 4.30% seen in mid-January.
  • Yields tracked a rebound in equities as markets rotated back into riskier assets after a weak start to the week, aided by sharp losses in bullion that triggered higher margin requirements across major exchanges.
  • Investors continued to reassess the monetary policy outlook under incoming Fed Chair Kevin Warsh, who is widely viewed as an inflation hawk.
  • Warsh’s historical opposition to an expanded Fed balance sheet has reinforced expectations of a steeper yield curve at the start of the month.
  • Treasury yields were further supported by stronger-than-expected ISM data, which signalled a rebound in US manufacturing activity.

• US Dollar rebounds as Fed leadership uncertainty lifts greenback
  • The US dollar index rose toward 97.7 on the first trading day of February, the highest in over a week, extending gains of more than 0.7% from the prior session.
  • The move marks a rebound after a weak January for the dollar.
  • President Donald Trump’s nomination of Kevin Warsh as the next Fed chair injected fresh uncertainty into the monetary policy outlook.
  • Markets view Warsh as relatively hawkish, favouring lower interest rates but with a more restrained easing path than some alternative candidates.

• Crude oil prices slide as Iran tensions ease, dollar strengthens
  • Brent crude prices fell after President Trump said Iran was “seriously talking” with Washington, easing fears of near-term supply disruptions.
  • A stronger US dollar weighed on commodities, making oil more expensive for non-US buyers.
  • Milder weather forecasts reduced concerns over heating fuel demand.
  • Brent dropped 4.4% to $66.30/barrel; WTI fell 4.7% to $62.14/barrel.

Day’s Ledger

Economic Data

• Euro Manufacturing PMI
• US S&P Global Manufacturing PMI 

Corporate Actions

• Oct-Dec Earnings: Adani Enterprises, Adani Ports, Aditya Birla Capital, Bajaj Finance, Mankind Pharma, NMDC, Pidilite Industries, Solar Industries, Varun Beverages
• Angel One board to consider fund raising
• Sical Logistics board to consider rights share issue 

Policy Events

• Fed Bostic Speech
• RBA Interest Rate Decision 

Tickers to Watch

• Hyundai Motor India Q3FY26 net profit increases 6.3% to ₹1,234 crore
• PB Fintech Q3 FY26 results: Net profit increases 165% to ₹189 crore
• Nexus Select Trust's Q3FY26 net operating income rises 15% to ₹450 cr
• Ather Energy Q3 results: Net loss narrows to ₹85 crore, revenue rises
• Mahindra Lifespace Developers posts ₹109 crore in profit for Q3 FY26
• Godrej Properties sells homes worth ₹2,000 crore in Worli project
• Ashok Leyland's sales rise 27% in January on strong domestic demand
• Maruti Suzuki India's Y-o-Y sales rise 12% to 236,963 units in January
• Sun Pharma sees US generics stabilising, pins growth on innovation push
• Suzuki Motorcycle India posts 15% vehicle sale at 1,25,786 units in January
• Govt mulls stake sale in LIC via FPO in next financial year
• Govt considering merger of state-run entities PFC and REC 

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