Cautious Risk-On Mood in Asia as Markets Lean Toward Fed Easing

GLOBAL MOOD: Mild Risk-On
Drivers: Fed rate-cut bets, Ukraine–Russia peace talks,

Asia-Pacific markets opened mixed, reflecting a cautious risk-on tone after Wall Street rose on softer US jobs data that boosted expectations of a Fed rate cut next week. Easing Treasury yields, a weaker dollar and firmer oil added to the shifting risk backdrop.

TODAY’S WATCHLIST
 - RBI MPC Policy Meeting Day 2
 - US Balance of Trade

THE BIG STORY
President Donald Trump’s unconventional, high-pressure approach to brokering a Ukraine peace deal has triggered fresh confusion in Washington and deep unease among US allies. The proposal viewed as unusually Russia-friendly demanded major concessions from Kyiv, came with a short deadline and bypassed traditional diplomatic channels, echoing Trump’s past freelance diplomacy in Gaza, Iran and Venezuela. While the strategy aims for swift breakthroughs, it carries significant geopolitical and domestic risks, even as Trump continues to personally champion the plan on social media.

Meanwhile, the Federal Reserve quietly reached an inflection point in its finances for the first time in three years. After accumulating more than $240 billion in losses under its post-pandemic policy framework, the Fed has started to generate enough income since early November to slowly shrink its deferred asset, the accounting mechanism it uses to record losses. Though progress is marginal, analysts say the shift is meaningful, with combined profits of the 12 regional Fed banks expected to exceed $2 billion this quarter. Still, experts caution it will take years before the Fed fully reverses its losses and resumes sending surplus cash back to the Treasury.

DATA SPOTLIGHT
US services activity delivered mixed signals in November. The ISM Services PMI rose to 52.6, its strongest reading in nine months and above expectations, supported by stronger business activity, healthier new orders and the largest backlog increase since February.

Labour market signals turned cloudier. Private payrolls fell by 32,000 in November, the biggest drop since March 2023, as small firms cut staff, according to ADP. While the print sharply missed expectations for job gains, economists noted it may overstate labour market weakness, with government data still showing near-historic lows in layoffs.

Meanwhile, the S&P Global Services PMI eased to 54.1 from 54.8, marking the softest expansion in five months, though new orders accelerated to the fastest pace since the start of the year. The data indicated solid underlying demand, improving confidence and expectations that lower rates will support activity into early 2026.

In the goods economy, the picture remained subdued. US manufacturing output was flat in September, while durable goods saw marginal gains led by aerospace, fabricated metals and electronics. Industrial production increased 0.1%, beating expectations, thanks to a 1.1% rebound in utilities following August’s sharp drop.

Takeaway: The US economy continues to lean on services strength, while manufacturing remains weak but stabilising on the margins. Industrial activity is patchy, supported by utilities, and the sharp ADP jobs decline likely exaggerates labour softness rather than signalling a fundamental deterioration.

WHAT HAPPENED OVERNIGHT

• US equities ended higher as data kept expectations firm for a Fed rate cut next week
  • The Dow rose 0.86%, the S&P 500 gained 0.30%, and the Nasdaq added 0.17%.
  • The clearing of shutdown-delayed data helped markets gauge the Fed outlook more clearly.
  • Microsoft dropped 2.5% after reports of lower AI software sales quotas, though a partial recovery followed the company’s denial. 

• US Treasury yields eased as markets continued to price a 25 bps Fed rate cut
  • The 10-year yield fell to 4.06% and the 2-year yield slipped to 3.49%.
  • Markets pricing an 89% chance of a 25 bps Fed rate cut at next week’s meeting.
  • President Trump said he will announce his pick to succeed Jerome Powell as Fed Chair early in 2026. 

• The US dollar weighed down by softer US jobs data and expectations of more rate cuts
  • The euro hit a six-week high at $1.1668 after stronger euro-zone activity data.
  • The dollar index fell to 98.89, marking a ninth straight session of declines.
  • The dollar weakened to 155.23 against the yen. 

• Oil prices moved higher as doubts grew about progress toward a Russia-Ukraine peace deal.
  • Brent settled at $62.67 and WTI closed at $58.95.

DAY’S LEDGER

Economic Data

• Eurozone Retail Sales
• US Balance of Trade 

Corporate Actions

• Aegis Vopak board to mull fund raising 

Policy Events

• ECB Cipollone Speech
• ECB Guindos Speech
• ECB Lane Speech
• Fed Bowman Speech 

Tickers to Watch

• INDIGO cancels 300-plus flights in 2 days as pilot shortage hits operations
• CIPLA, Stempeutics launch stem cell therapy for knee osteoarthritis
• SUN PHARMA unit to invest ₹30 billion for new plant in Madhya Pradesh
• Japan's JFE Steel to invest ₹157.50 billion in JV with JSW STEEL'S BPSL
• JM FINANCIAL Home Loans targets 30% annual AUM growth to FY27
• Arun Kumar Singh gets one-year extension as ONGC chairman and CEO
• ICICI LOMBARD receives ₹948 million GST demand, penalty 

MUST READ

• A Nervous Rupee Meets an Uncomfortable Silence
• India’s Growth Surge Outpaces its Productivity Gains
• Base-Year Syndrome in India’s Real GDP Growth
• A Leaner Rulebook Begins Malhotra’s RBI Legacy
• SIM-Binding Necessary Evil, But Govt Must First Win Trust
• Not losing sleep over it: CEA Nageswaran on rupee hitting record low
• Lok Sabha passes Bill to levy excise duty on tobacco
• RBI approves Vikram Sahu as CEO of Bank of America in India: Internal memo
• Implementation of new labour codes likely by April 2026: Labour Minister
• India in talks with Moscow to produce Russia-designed nuclear reactors
• Earnings growth pick up to boost equity returns in 2026: Kotak MF
• SEBI introduces single window gateway for low risk foreign investors
• India's FY26 growth forecast likely to be revised upwards: Harald Finger

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

The Nuclear Crossroads: An Inflexion Point or a Dead-end?

India’s push to bring private capital into nuclear energy was meant to break a decades-old bottleneck. Instead, the first pilot for 220 MW small reactors has exposed a deeper structural flaw: a model that hands all the financial and liability risk to private players while retaining all ownership and control with the state. No global nuclear market works this way — not the US, not France, not China. The result is predictable resistance from bidders and a reform path that now looks misaligned with both economics and engineering reality.

Sharmila Chavaly writes, if India wants nuclear energy to scale from 8 GW today to 100 GW by 2047, the real reform must start not with tenders but with legislation, independent regulation, and a risk-sharing framework where the state acts as guarantor rather than gatekeeper.