Risk Aversion Returns to Asia Amid Trump Tariff Warning

GLOBAL MOOD: Risk Off
Drivers:  Trump Tariff Threats, Iran Geopolitical Tension

Asian markets traded mixed, reflecting a cautious risk-off mood after a sharp selloff on Wall Street. Investor sentiment was shaken by renewed tariff threats from US President Donald Trump, who warned of significantly higher duties on countries seeking to revisit trade terms following the Supreme Court’s ruling. His swift move to impose replacement tariffs has reinforced policy uncertainty rather than easing it.

At the same time, fresh concerns that artificial intelligence could disrupt software and payments companies triggered heavy losses in US equities, dragging broader risk appetite lower. Treasury yields fell to multi-month lows as investors rotated into safer assets, while the dollar held firm on haven demand and fading rate-cut expectations.

With trade tensions, AI volatility and geopolitical risks in play, markets remain defensive and headline-driven.

TODAY’S WATCHLIST
 - India State Loan Auctions
 - US Fed Bostic Speech
 - US Fed Waller Speech

THE BIG STORY
The US President Trump issued a sharp warning to trading partners on Monday, threatening significantly higher tariffs and potential licence fees on any country that tries to renegotiate recently struck trade deals in the wake of the Supreme Court ruling. In a Truth Social post, Trump cautioned that nations attempting to "play games" with the decision would face duties far higher than those previously agreed, while asserting that the ruling actually affirmed his ability to impose tariffs under alternative legal authorities "in a much more powerful and obnoxious way." The comments sent fresh tremors through global markets already rattled by trade policy uncertainty, reinforcing that the court ruling has done little to reduce the tariff threat - it has simply shifted its legal foundation.

On the front of monetary policy, Federal Reserve Governor Christopher Waller signalled openness to pausing rate cuts at the March meeting if February jobs data confirms the labour market is on firm footing. Waller, who had dissented at January's meeting in favour of a cut, called January's surprise 130,000 job additions an upside surprise and said a continuation of that trend could tilt his view toward a hold. The remarks add another voice to the Fed's increasingly divided chorus, complicating the rate outlook for incoming chair Kevin Warsh, Trump's nominee to replace Jerome Powell when his term ends in May.

Data Spotlight
The US Texas manufacturing stabilised in February, with the Dallas Fed's general business activity index edging up to 0.2 from -1.2, as employment growth held steady, workweeks lengthened, and manufacturers struck an optimistic tone on future production. Wage pressures stood out, with the wages and benefits index surging to 31.9 from 17.4, while raw material costs eased somewhat. Looking ahead, future production rose five points to 34.3, though uncertainty also ticked higher.

At the national level, new factory orders fell 0.7% in December to $617.5 billion, broadly in line with expectations, pulled lower by a sharp 24.8% drop in non-defense aircraft and parts. Durable goods orders slipped 1.4%, though computers, machinery, fabricated metals, and primary metals all recorded gains, while nondurable goods orders held flat for a second consecutive month.

Takeaway:
US manufacturing remains generally steady, with regional outlooks showing cautious optimism and national orders revealing some weakness, especially in transportation equipment. Rising wages in Texas could signal persistent services inflation, complicating the Fed's decisions.

WHAT HAPPENED OVERNIGHT

• US stocks tumbles over 1% as AI disruption fears and trade uncertainty
  • US major indices fell more than 1% at the close, as AI displacement fears and erratic trade policy signals combined to crush risk appetite.
  • AI disruption concerns resurfaced forcefully, hitting software services and payments stocks hardest as investors questioned which industries face displacement next.
  • Healthcare bucked the trend, gaining 1.2%, lifted by Eli Lilly surging 4.9% after its obesity drug Zepbound outperformed rival Novo Nordisk's CagriSema in a head-to-head trial.
  • Airlines and travel stocks plunged 3.8% and 3.7% respectively after a powerful winter storm buried the Northeast under 15+ inches of snow, cancelling 89-98% of flights at New York area airports.
• US Treasury yields fall to a three-month low on AI concerns and trade uncertainty
  • The 10-year Treasury yield fell to 4.03%, its lowest level in nearly three months, as investors rotated into safe assets amid renewed market stress.
  • AI displacement fears resurfaced sharply, with software services and payments stocks selling off heavily, driving funds toward the relative safety of Treasuries.
  • Far from providing relief, the Supreme Court's tariff ruling introduced fresh uncertainty around trade policy, US debt sustainability, and the dollar's outlook.
  • The court made no ruling on tariff refunds, leaving open a potential $170 billion hole in US finances that markets are now beginning to price.
  • Trump's rapid replacement levies have raised tensions with Europe and added a new layer of confusion around the global trade policy outlook.
• US Dollar steadies near one-month high as markets digest tariff ruling fallout
  • The US dollar index held at 97.8, paring early losses to remain near its highest level in one month as markets reassessed the net impact of the tariff ruling on the US balance of payments.
  • Trump raised his replacement Section 122 tariffs to 15% over the weekend, the legal maximum but stopped short of clarifying whether existing trade deals would be affected.
  • Congress is unlikely to extend the measures past Q4, adding a layer of uncertainty around the durability of the new tariff framework.
  • Rising US-Iran tensions kept haven demand for the dollar intact, limiting the day's pullback despite the legal setback for the White House.
• Crude oil prices dip but remain near six-month highs before US-Iran nuclear talks
  • Brent crude prices settled at $71.49/barrel, down 27 cents or 0.38%, while WTI slipped to $66.31/barrel, off 17 cents or 0.26%.
  • Despite the modest pullback, both contracts remain at six-month highs as geopolitical risk premium stays firmly in place.
  • Markets are in a holding pattern ahead of a third round of US-Iran nuclear talks, with the outcome seen as a key near-term price catalyst.
    
    

Day’s Ledger

Economic Data

• India States Loan Auctions 

Corporate Actions

• 5Paisa Capital board to consider fund raising 
• Healthcare Global board to consider rights share issu

Policy Events

• US Fed Bostic Speech
• FUS ed Collins Speech
• US Fed Waller Speech 

Tickers to Watch

• IDFC First Bank to repay Haryana govt ₹5.90 billion soon after branch fraud case
• IDFC First Bank fraud puts spotlight back on governance gaps in pvt banks
• LTM secures $100 million deal from European medtech firm for product support
• Vi's ₹450 billion capex insufficient to regain market share, says HSBC
• Bharti Airtel to infuse ₹200 billion in Airtel Money to push digital lending
• Torrent Group forays into diagnostics with large national reference lab
• M&M, Manulife name Suresh Agarwal MD & CEO designate of life insurance JV
• Holding company discount, debt are a drag on agro firm UPL restructuring 

Must Read

• Sebi plans overhaul of PMS regulations, flags need for stronger governance
• Govt launches ₹16.7 trillion asset monetisation pipeline till FY30
• Govt to raise ₹163 billion by monetising oil and gas assets by FY30
• New CPI series unlikely to reset inflation target: RBI Guv Sanjay Malhotra
• India, France amend DTAC; abolish MFN clause and revise dividend rules
• Gold imports not alarming yet, FDI inflows a puzzle: FM Sitharaman
• Countries that play games with US trade deals to face higher tariffs: Trump

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day

India Is Quietly Becoming the World’s Valuation Magnet

Hyundai India priced at 26x earnings while its parent traded at 4x.
LG Electronics India briefly surpassed its global parent in market cap.

This isn’t IPO hype. It’s valuation inversion.

Chandrika Soyantar writes, capital now follows pricing power, not geography. Liquidity depth, strong retail flows and growth visibility are turning India into a pricing centre.

In the 1970s, localisation was regulatory.

Today, it’s driven by multiples.

Cycle — or structural shift?