Risk-Off Mood in Asia Despite Brighter Global Equity Outlooks

GLOBAL MOOD: Risk-off
Drivers: India–US Tariff Talks, AI Capex Optimism, Fed Outlook

Asian markets adopted a risk-off tone as investors stayed cautious ahead of a heavy US data slate and key tech earnings, with Japan weaker. Concerns over global growth signals and Fed uncertainty offset improving trade sentiment and upbeat 2026 equity expectations.

TODAY’S WATCHLIST
 - Fed Waller,  Barr Speaks
 - RBA Meeting Minutes
 - India State loan Auction
 
THE BIG STORY
India and the US are close to concluding the first tranche of their bilateral trade agreement, with both sides nearing a resolution on reciprocal tariffs, a senior Indian government official said on Monday. The package under discussion is expected to address Washington’s steep tariff actions, including the 50% duty imposed in August on several Indian products and the 25% punitive tariff linked to India’s purchases of Russian oil. According to the official, resolving the 25% penalty is essential: “Without addressing this, the agreement would have no meaning.” While no deadline has been set, both countries remain in continuous dialogue. Last week, President Donald Trump said Washington and New Delhi were “pretty close” to reaching a fair-trade deal and hinted that US tariffs on Indian goods may be lowered “at some point”.

At the same time, Morgan Stanley struck a bullish tone on global risk assets for 2026, expecting US equities to outperform peers next year, supported by rising AI-related capital expenditure and a favourable policy backdrop. The bank projects moderate global growth and disinflation, though it warns that uncertainty remains high.

Data Spotlight
US construction spending unexpectedly rose 0.2% in August, marking a second consecutive monthly increase after July was revised up to a 0.2% gain. Economists had expected a slight decline, but the rebound was driven largely by home renovations, as elevated mortgage rates continued to cool single-family homebuilding. The report showed spending was still 1.6% lower year-on-year. Private construction rose 0.3%, with residential investment up 0.8%, though new single-family construction fell 0.4%. Multi-family outlays edged up 0.2% but remain a small share of overall activity.

Takeaway:
US August’s construction rebound was driven by renovations rather than new builds, reflecting the impact of high mortgage rates on housing activity.

WHAT HAPPENED OVERNIGHT

• US stocks drop amid tech sector decline
  • US equities fell Monday ahead of a heavy week of delayed data and major tech earnings.
  • Dow −1.1%; S&P 500 −0.8%; Nasdaq −0.7%, both breaking key technical levels for the first time since April.
  • Big tech dragged sentiment, with Nvidia −1.9% ahead of earnings seen as a key test for AI valuations.
  • Alphabet gained after Berkshire Hathaway’s multibillion-dollar stake drove selective buying.

• US Treasury yields slip ahead of data-heavy week
  • 10-year US Treasury yield eased to 4.14% as traders turned cautious ahead of the backlog of US data releases.
  • Policymakers’ growing doubts on further rate cuts made this week’s data more critical for the Fed outlook.
  • FOMC minutes expected to provide additional insight into internal policy debates.

• US Dollar steady before data rebound
  • Dollar strengthened against the euro and yen as markets positioned for long-delayed US data.
  • Dollar index moved above 99.4, recovering some of last week’s declines.
  • Limited reaction to Trump’s expected reversal of tariffs on 200+ food products due to cost-of-living concerns.

• Crude oil eases as Russian exports resume
  • Brent fell 0.3% to $64.20; WTI slipped 0.3% to $59.91 after exports resumed at Russia’s Novorossiysk terminal.
  • Resumption eased near-term supply fears, pulling back part of Friday’s geopolitical-driven gains.

DAY’S LEDGER

Economic Data

• RBA Meeting Minutes
• India State loan Auction

Corporate Actions

• Jul-Sep Earnings: Ashiana Ispat
• STL Networks to consider fund raising

Policy Events

• Fed Waller Speech
• Fed Logan Speech
• Fed Barr Speech
• ECB Buch Speech              
  
  
  

TICKERS TO WATCH

• AXIS MAX LIFE aims for a ‘breakout No. 3’ position in life insurance, says MD & CEO
  
• DYNEMIC PRODUCTS faces completed Income Tax search operations across offices and manufacturing units
  
• GMR AIRPORTS handles 10.14 mln passengers in October, a 2.8% YoY increase
  
• Hcltech, with Nvidia, sets up a physical AI innovation lab
  
• HC declines FMC Corp’s plea to restrict Natco Pharma from selling its insecticide
  
• INFOSYS unveils an AI-first GCC model to speed up enterprise transformation
  
• JSW ENERGY CFO Pritesh Vinay resigns, to stay till December 2025
  
• JSW INFRASTRUCTURE unit to buy 51% stake in an Oman ports SPV, project pegged at $419 mln
  
• PFIZER introduces Rimegepant ODT in India, targeting the $200 mln migraine therapy market
  
• PURAVANKARA leases 120,000 sq ft retail space in Bengaluru to IKEA
  
• Supreme Court to hear PIL seeking probe into alleged ANIL AMBANI–RELIANCE COMMUNICATIONS bank fraud
  
• TATA MOTORS promoter holding stands at 42.71% post demerger
  
  

MUST READ

• Chronic Delays in Kharif Estimates Are Fuel for Market Volatility
• India’s US Exports Rebound After Four Consecutive Months of Decline
  Festive Season Fails to Spur Jobs Market, Urban Unemployment Rises
• India proposes anti-dumping duties on met coke imports from six countries
• CBDT confident of meeting FY26 tax target; refund checks slowing outflows
• How RJD Lost the Plot: The Story of MGB's Electoral Collapse
• GST reforms expected to ignite animal spirit in financial sector: DEA secy
• Tax and tariff disruptions reshape supply chains as strategic engines: PwC
• Fed’s Jefferson Says Weaker Labor Market Shifts Balance of Risks
  
  

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

Sanjay Malhotra’s first year at the RBI has been a study in bold experimentation—front-loaded rate cuts, freer regulatory levers, and a governance philosophy that urges boards to think and act for themselves. But it has also exposed the friction between autonomy and oversight. Malhotra has given the RBI a new tone—confident, pro-growth, and intellectually open—but tone must now meet discipline, sequencing, and sharper supervision.

Read GURUMURTHY R’s analysis on BasisPoint: Malhotra’s RBI: Between Freedom and Friction