North Korea Fires Missile Amid US Defense Shift

Ukadike Micheal

Remarks of Officials

Economic

Political

Summary:

North Korea launches a projectile as a new US defense strategy shifts deterrence burden to allies, straining US-South Korea ties.

North Korea launched an unidentified projectile from its east coast on Tuesday, according to South Korea's military. The launch comes just days after the United States unveiled a new defense strategy that shifts more responsibility for deterrence onto its allies.

South Korea's Joint Chiefs of Staff confirmed at least one projectile was fired into the waters off the peninsula. In Japan, the Coast Guard reported that an object, likely a ballistic missile, had probably already fallen into the sea. Officials have not yet released further details.

Pyongyang's Second Test of the Year

This marks Pyongyang's second ballistic missile launch in 2022. Following its first test in early January, North Korea claimed it had successfully fired a hypersonic missile.

The latest launch also follows recent accusations from the North that South Korea violated its airspace with drones. The South Korean government has denied any involvement, suggesting the unmanned vehicle may have been sent by civilians and has opened an investigation.

Launch Coincides with New US Defense Strategy

The timing of the test is significant, as it occurred while Undersecretary of Defense for Policy Elbridge Colby was visiting Seoul. During his visit, Colby lauded South Korea as a model ally prepared to assume a greater role in its own defense.

His trip followed the public release of the US National Defense Strategy. The new doctrine urges South Korea to take the lead in deterring North Korean aggression, reflecting the Trump administration's strategic pivot to prioritize the defense of the US homeland.

This move signals a potential reduction in direct American military support for deterring the North's nuclear ambitions, placing more of the burden on regional partners.

Broader Tensions in the US-South Korea Alliance

The military and strategic developments are unfolding alongside economic friction between the two allies. President Donald Trump recently threatened to impose a 25% tariff on goods imported from South Korea. He cited the country's legislature's failure to codify a trade agreement the two nations had reached the previous year.

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Risk Warnings and Disclaimers

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Ukadike Micheal

Central Bank

Remarks of Officials

Bond

Political

Stocks

Economic

Forex

The Fed's Pivot Toward Looser Money

In December, the Federal Reserve cut its official interest rate to a range of 3.5% to 3.75%, the lowest since 2022. This move came despite persistent inflation and lingering uncertainty about the impact of tariffs and trade conflicts on prices.

Simultaneously, the U.S. central bank paused its quantitative tightening program, which was designed to shrink its balance sheet. It has since launched Treasury bill purchases under a program called Reserve Management Purchases (RMP)—a move widely seen as a form of disguised quantitative easing. Further plans are in motion to have Freddie Mac and Fannie Mae acquire $200 billion in mortgage-backed securities, a strategy intended to lower home loan rates before the mid-term elections.

Growing political influence over the Fed suggests that a period of sustained monetary laxity is likely. More aggressive rate cuts are on the table, with President Donald Trump advocating for rates as low as 1%. Other potential tools include yield curve control to suppress long-term rates and the continued weakening of banking regulations, especially minimum capital requirements.

America's Economic End Game

The primary goal of these policies is to stimulate economic activity, with President Trump even suggesting growth could reach 20% or 25%. Lower interest rates serve another critical function: reducing the federal government's interest payments, now the second-largest budget item after Social Security.

This strategy is also designed to achieve several related objectives:

• Funding Deficits: Looser bank rules and the RMP program help finance large, ongoing government budget deficits.

• Devaluing the Dollar: A weaker currency is intended to boost the competitiveness of American exports.

• Inflating Away Debt: The combination of strong nominal growth, higher prices, and negative real interest rates is a classic strategy to reduce the burden of the nation's high public debt.

As former U.S. President Herbert Hoover once noted, "The first panacea of a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin."

How Asia Becomes Collateral Damage

The "America First" strategy, combining tariffs, sanctions, and aggressive monetary policy, directly threatens the economic sovereignty of other nations, with Asian economies being particularly vulnerable. Their heavy reliance on the U.S. dollar and export-driven growth models makes them susceptible to shocks.

U.S. policies are set to destabilize currency markets and fuel volatility. A forced revaluation of Asian currencies would undermine their exports and reduce local currency revenues from trade denominated in U.S. dollars. This could also import deflationary pressures into their economies.

Furthermore, Asian nations face a structural problem: their individual and state savings often exceed available local investment opportunities due to limited domestic capital markets. This has led to an oversized exposure to the U.S. dollar and American markets. A dollar devaluation would translate directly into significant losses on these investments. Asian central banks and sovereign wealth funds are among the largest holders of U.S. government debt, a problem compounded by recent agreements from Japan and South Korea to invest an additional $550 billion and $350 billion, respectively, in the U.S. to avoid tariffs.

Capital flows present another threat. Money is already moving out of the U.S. and into Asian, South American, and African assets, often through carry trades funded by cheap borrowing. This influx distorts local asset prices and forces central banks to manage currency appreciation rather than focusing on domestic economic priorities.

The Rising Risk of a Global Financial Crisis

Domestically, America's loose monetary conditions are inflating already over-stretched valuations in its equity and property markets, bringing a major financial crisis closer. Given the deep institutional linkages, a crash in U.S. markets would inevitably transmit financial instability directly into Asia.

To mitigate these growing risks, Asian economies must take decisive action.

1. Reduce Reliance on the U.S. Dollar

The first step is to redenominate trade away from the U.S. dollar and reduce dependence on America as a buyer of last resort. This requires structural reforms, such as enhancing welfare safety nets to boost domestic consumption and reduce savings rates. Accelerating bilateral and regional trade agreements is also crucial to diversify trading partners.

2. Diversify Financial Investments

Second, Asian nations must decrease their holdings of dollar-denominated assets. In the short term, this involves hedging currency risk and controlling unhedged retail and institutional investments in U.S. markets. The long-term goal is a strategic shift toward non-U.S. investments. This also means avoiding financial "round-tripping," where Asian capital is routed through U.S.-based asset managers only to be reinvested in non-American ventures. Building up regional money markets and financial institutions is key to keeping funds within the region.

3. Forge a United Economic Bloc

Most importantly, Asia must unite to leverage its combined economic and geopolitical power. Progress toward a functional regional bloc has been hindered by nationalism, ethnic diversity, mutual suspicion, and a reluctance to change. The U.S. has successfully used a "divide and conquer" strategy, but a collective, coordinated approach could shift the balance of power.

A Critical Juncture for Asia

America will continue to pursue radical economic policies to manage its relative decline and protect its global standing. These strategies will likely outlast the current administration, just as many of President Trump's first-term policies were continued by his successor, Joe Biden.

For Asia, the message is clear: act decisively and urgently. The ongoing realignment of global power presents an opportunity to decouple from America's economic trajectory. Failure to do so will mean the region will be forced to bear a disproportionate share of the costs of America's inevitable adjustment.

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Justin

Forex

Commodity

Natural Gas has once again reminded traders of its explosive potential. After finding buyers at a key Fibonacci extension area, prices catapulted 146% in just 12 trading days—an extraordinary rally that left skeptics behind and rewarded those who trusted the technical confluence. This surge wasn't just about numbers on a chart; it was a vivid demonstration of how market psychology, technical precision, and momentum can align to produce breathtaking moves. For traders and analysts alike, the rally offers a textbook case study in how Fibonacci levels can act as springboards for powerful trends. Charts often speak louder than words, so let's turn to the charts to see how this remarkable move unfolded…

Natural Gas Daily Chart (Jan 14): Price approaches the 3.022 – 1.965 Fibonacci extension zone

Natural Gas 11 Jan Daily Elliott Wave ChartOn the daily chart from January 11, Natural Gas was approaching the 3.022 – 1.965 blue box zone—a critical Fibonacci extension area we had been watching closely. This region carried the potential to attract buyers and set the stage for the next leg of the rally. Going to a smaller time frame, within wave (( C )), we saw wave (3) unfolded shorter than wave (1). This gave us a precise invalidation level for wave (5) of ((C)) at 3.008. A break below that level would have opened the door for a deeper pullback toward the 2.620 – 1.965 area. However, buyers stepped in just before this threshold was tested, defending the structure and reigniting the rally.

Natural Gas Daily Chart (Jan 26): Fibonacci extension zone drives a powerful 146% rally in 12 days

"Daily chart from January 26 above captures the explosive rally that followed. After price respected the Blue box zone, buyers stepped in with conviction, driving Natural Gas sharply higher reaching a high of $7.439. The move unfolded with textbook momentum, surging 146% in less than two weeks and confirming the strength of the technical setup. The Natural Gas rally underscores a simple truth: Blue box zones mark decisive turning points. Recognizing these areas early can sharpen your edge, helping you anticipate momentum shifts and position yourselves in the market with confidence.

Source: Elliott Wave Forecast

Risk Warnings and Disclaimers

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Gerik

Economic

Tariff Shock Fails to Derail Risk Appetite

Markets once again demonstrated resilience in the face of renewed tariff rhetoric from Donald Trump, who unexpectedly announced that U.S. tariffs on South Korean goods would rise to 25% from 15% due to delays in implementing a previously agreed trade deal. The measures would affect key sectors such as automobiles, pharmaceuticals, and lumber, traditionally sensitive areas for South Korea’s export driven economy.

Initial market reaction was negative, with South Korea’s benchmark index briefly falling more than 1%. However, the dip proved short lived. Buyers quickly stepped in, pushing equities sharply higher and sending the market to fresh record levels. This rapid reversal suggests that investors increasingly view tariff announcements as tactical pressure rather than firm policy, weakening the causal impact of such statements on asset prices.

Dip Buying Reflects Confidence in De-escalation

The speed of the rebound highlights growing confidence that trade tensions will ultimately cool. Market participants pointed to the likelihood of diplomatic engagement, with South Korea’s industry minister expected to travel to Washington in the coming days. This expectation has reinforced the belief that negotiations, rather than prolonged confrontation, will shape the outcome.

Traders have increasingly priced in the idea that tariff threats often serve as leverage rather than endpoints. As a result, volatility generated by political headlines is now more likely to attract opportunistic buying than sustained selling, particularly in markets that have delivered strong performance year to date.

Earnings Optimism Anchors Global Markets

Beyond Asia, broader global sentiment remained constructive. Investors are positioning ahead of earnings from major U.S. technology companies, including Meta Platforms, Microsoft, and Tesla, which are seen as critical to extending the current equity rally into 2026.

This earnings driven optimism has lifted markets across regions. MSCI’s Asia-Pacific index excluding Japan rose to a new record high, Japan’s Nikkei advanced despite a stronger yen, and European equity futures pointed to a firmer open. U.S. futures also edged higher, reinforcing the view that corporate fundamentals remain the dominant driver of risk appetite.

Precious Metals Capture Residual Unease

While equities surged, underlying caution was evident in commodities. Gold rose around 1% to above $5,060 an ounce, and silver jumped roughly 5% to near $109, pushing both metals back toward record highs. The rally reflects continued hedging against policy unpredictability and currency weakness, particularly as investors remain alert to geopolitical risk.

This divergence between strong equity inflows and rising demand for safe havens suggests a layered market response. Rather than signaling panic, it points to portfolio diversification, where investors maintain exposure to growth while simultaneously insuring against political and macroeconomic shocks.

Markets Adapt to Political Volatility

The latest episode reinforces a clear pattern in early 2026. Tariff headlines and political disruptions continue to generate short term volatility, but their influence on market direction has diminished. Investors appear increasingly confident that earnings growth, liquidity, and negotiation channels will ultimately override confrontational rhetoric.

For now, markets are treating trade policy risk as episodic rather than structural. As long as earnings expectations remain intact and diplomatic off ramps stay open, tariff threats are more likely to be absorbed than feared, turning market dips into buying opportunities rather than triggers for broader selloffs.

Source: Reuters

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Ukadike Micheal

Remarks of Officials

Economic

Political

Russia-Ukraine Conflict

India and the European Union announced on Tuesday they have concluded negotiations on an ambitious trade pact, a move celebrated by both sides as the "mother of all deals" in a global economy shaken by U.S. President Donald Trump's tariff policies.

The agreement solidifies a powerful economic bloc. According to the European Commission, trade in goods and services between the EU and India already exceeds €180 billion ($213 billion) annually and supports nearly 800,000 jobs in the EU.

This new deal is projected to double the EU's goods exports to the nation of 1.4 billion people by 2032. The core mechanism is the elimination or reduction of tariffs on 96.6% of the value of EU shipments to India.

A New Era for Trade and Investment

Prime Minister Narendra Modi, in a video message, emphasized that the agreement unlocks "big opportunities" for both economies. He noted that the partnership represents a combined 25% of global GDP and one-third of all international trade. "Along with trade, this agreement strengthens our shared commitment toward democracy and rule of law," Modi stated.

The Prime Minister highlighted the strategic value of the pact, framing it as a complement to India's existing agreements with Britain and the European Free Trade Association. "This will strengthen both trade and the global supply chain," he said.

Modi also pointed to specific domestic benefits, congratulating key Indian industries. "I congratulate all those attached with sectors such as textiles, gems and jewelry and leather and shoes as this pact will be very helpful to all of you," he remarked. "This trade deal will not only empower manufacturing in India but will also further expand sectors linked to services."

What the Tariff Cuts Mean in Practice

The agreement outlines significant reductions in Indian tariffs on key European products. Specific changes include:

• European Wines: Tariffs will be slashed from 150% to 75% initially, with a further reduction to as low as 20% over time.

• Olive Oil: The current 45% tariff will be phased out completely, dropping to 0% over a five-year period.

A Deeper Strategic and Security Partnership

The summit in New Delhi, attended by European Commission President Ursula von der Leyen and European Council President Antonio Costa, also produced a Security and Defense Partnership. This complementary agreement aims to enhance cooperation beyond economics.

According to an EU handout, the partnership will focus on critical areas including:

• Maritime security

• The defense industry

• Cyber and hybrid threats

• Space

• Counter-terrorism

Geopolitical Tensions with the United States

The historic India-EU deal was finalized against a backdrop of friction with the Trump administration. In August, President Trump imposed steep 50% tariffs on Indian goods, which included a 25% penalty targeting New Delhi’s purchases of Russian oil.

The U.S. administration has openly criticized the EU for pursuing the trade pact. In an interview with ABC News on Sunday, U.S. Treasury Secretary Scott Bessent directly challenged the European position.

"We have put 25% tariffs on India for buying Russian oil. Guess what happened last week? The Europeans signed a trade deal with India," Bessent said.

He argued that the EU's actions indirectly undermine sanctions against Russia. "And just to be clear again, the Russian oil goes into India. The refined products come out, and the Europeans buy the refined products. They are financing the war against themselves," Bessent explained. "So, [under] President Trump's leadership, we will eventually end this Ukraine-Russia war."

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Gerik

Economic

Stocks

Earnings Optimism Overpowers Trade Rhetoric

Asian stock markets advanced to unprecedented levels on Tuesday, with investors focusing squarely on an intense week of U.S. corporate earnings rather than President Donald Trump’s decision to raise tariffs on South Korean imports. The MSCI Asia-Pacific index excluding Japan rose 0.9% to a record high, signaling sustained confidence in global equity momentum despite escalating geopolitical noise.

The rally was underpinned by rising expectations ahead of earnings from major U.S. technology firms, including Microsoft, Apple, and Tesla, scheduled to report later in the week. Nasdaq futures gained 0.5%, reinforcing the view that earnings strength remains the dominant driver of market sentiment.

This response suggests that while tariff announcements create short-term volatility, they are increasingly treated as background risk unless they directly threaten corporate profitability or global growth.

South Korea Rebounds Despite Tariff Shock

South Korean equities provided a clear example of this dynamic. After initially slipping on news that Trump would raise tariffs on Korean imports to 25%, the KOSPI reversed course and surged more than 2% to a new all-time high. The rebound indicates investor confidence that diplomatic engagement, rather than prolonged confrontation, will ultimately shape trade outcomes.

Market participants noted expectations that South Korea’s industry minister could travel to Washington as soon as Friday, potentially easing tensions. This highlights how markets differentiate between political signaling and policy execution, treating the former as noise unless reinforced by concrete action.

Tech Led Strength Across The Region

Gains were broad-based across Asia. Japan’s Nikkei 225 rose 0.7%, even as a stronger yen clouded the outlook for exporters. Chinese blue-chip stocks edged up, while Hong Kong’s Hang Seng Index gained around 1%. European markets were also set for a firmer open, with Euro Stoxx 50 futures pointing higher.

The regional rally underscores a correlation between global technology sector optimism and equity performance, with Asian markets benefiting indirectly from U.S. earnings expectations due to deep supply chain and capital market linkages.

Safe Havens Signal Persistent Unease

While equities pushed higher, safe-haven assets told a more cautious story. Gold climbed another 1% to around $5,065 an ounce, approaching its recent record, while silver gained 4% to $108 an ounce. Analysts pointed to ongoing geopolitical uncertainty and a weaker dollar as key drivers behind the renewed surge in precious metals.

This divergence illustrates a layered market response. Equity investors are embracing risk through earnings exposure, while other participants continue to hedge against policy instability and currency volatility. The relationship between rising equities and surging gold is therefore not contradictory but reflective of different risk management strategies operating simultaneously.

Dollar Weakness Adds Another Tailwind

Currency markets added to the broader narrative of uncertainty. The U.S. dollar hovered near four-and-a-half-month lows, pressured by speculation over potential U.S.-Japan coordination to support the yen and concerns about Washington’s tolerance for a weaker currency. Although the dollar edged slightly higher against the yen on Tuesday, it remains well below levels seen earlier in January.

This currency backdrop has indirectly supported Asian equities by improving financial conditions and boosting capital flows into non-U.S. markets, reinforcing the rally’s momentum.

Overall, Asian markets’ record-breaking performance reflects a clear prioritization of earnings growth over geopolitical disruption. Trump’s tariff threats against South Korea added to global uncertainty, but investors appear confident that strong corporate results, particularly from U.S. technology leaders, will continue to anchor risk appetite. Unless trade tensions escalate into concrete economic damage, markets seem prepared to treat political shocks as temporary detours rather than structural threats to the rally.

Source: Reuters

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Owen Li

Energy

Commodity

Economic

Political

Canada and India are set to reboot their relationship with a renewed focus on energy, pledging to expand two-way trade in oil and gas after a period of diplomatic tension. The move signals a major strategic reset for both nations.

A New Framework for Energy Cooperation

Under the revived partnership, Ottawa will commit to increasing shipments of crude oil, liquefied natural gas (LNG), and liquefied petroleum gas (LPG) to India. In return, New Delhi will boost its exports of refined petroleum products to Canada.

The agreement is expected to be formalized following a meeting between Canadian Energy Minister Tim Hodgson and Indian Petroleum and Natural Gas Minister Hardeep Singh Puri at India Energy Week in Goa on Tuesday.

This meeting serves to relaunch the "ministerial energy dialogue," a key channel for cooperation that had become inactive during a dispute over the killing of a Canadian Sikh activist.

Broader Goals for a Strategic Partnership

The renewed dialogue extends beyond traditional fossil fuels. According to a joint statement, Hodgson and Puri will also commit to:

• Facilitating greater reciprocal investment in their respective energy sectors.

• Exploring collaboration on hydrogen, biofuels, and battery storage.

• Cooperating on critical minerals and modernizing electricity systems.

• Investigating the use of artificial intelligence in the energy industry.

This initiative is a key part of Prime Minister Mark Carney's effort to diversify Canada's export markets, particularly as trade tensions with the United States escalate. It reflects a shift toward a more pragmatic, economy-focused diplomacy with major Asian partners.

The Economic Stakes and Geopolitical Context

The relaunch signals that both governments recognize significant untapped potential in their energy relationship. Prime Minister Carney is expected to visit India in the coming weeks to solidify this reset, building on talks he and Prime Minister Narendra Modi restarted in November for a comprehensive economic partnership agreement.

In 2024, two-way goods trade between the two countries reached C$13.3 billion ($9.7 billion), and Ottawa sees substantial room for growth. Energy is a primary focus, with India currently accounting for just 1% of Canada's critical minerals exports.

New infrastructure, including the expansion of the Trans Mountain pipeline, creates a more direct path for Canadian crude to reach India, though most shipments still transit through the U.S. Gulf Coast. Canada's west coast LPG terminals also offer relatively short shipping routes to the Indian market, and the country began exporting LNG to Asia in June 2025.

Carney's push to strengthen ties with India follows a recent trip to Beijing, where an agreement to reduce tariff barriers prompted U.S. President Donald Trump to threaten 100% tariffs on Canadian goods. Carney has maintained that Canada is not pursuing a free trade agreement with China.

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