Markets Cheer Partial US–China Deal, but Growth Caution Persists

GLOBAL MOOD: Cautiously Risk-on
Drivers: US–China Trade Breakthrough, Fed’s Hawkish Caution,

Markets in Asia are expected to extend gains early in the session, led by technology and export-oriented sectors, though profit-taking may emerge ahead of next week’s major data releases and central bank updates. Asian markets opened on a positive note, buoyed by the US–China partial trade truce and expectations of easing geopolitical tensions. However, investors remain watchful amid ongoing uncertainty over global growth, monetary policy divergence, and soft economic data.

TODAY’S WATCHLIST
 - India Sep fiscal Deficit Data
 - Earnings: Bank of Baroda, BPCL, Maruti Suzuki

THE BIG STORY
US President Donald Trump and Chinese President Xi Jinping reached a breakthrough agreement in Busan, South Korea, on Thursday, marking their first face-to-face meeting since 2019. The deal includes a tariff reduction cutting duties on Chinese imports from 57% to 47% in exchange for Beijing’s crackdown on the fentanyl trade, resumption of large-scale US soybean purchases, and a pause on new rare earth export restrictions. Both sides also agreed to suspend tit-for-tat port fees on global shipping routes, a move aimed at cooling tensions in the maritime and logistics sectors.

In parallel global developments, the European Central Bank held rates steady for the third straight meeting, keeping the main refinancing rate at 2.15% and the deposit rate at 2.0%. The ECB cited steady inflation near its 2% target and a resilient eurozone economy, though it warned of ongoing risks from trade frictions and geopolitical uncertainty.

Data Spotlight
US initial jobless claims fell to a seasonally adjusted 219,000 for the week ending October 25, down from 232,000 the previous week, according to JPMorgan estimates. The decline suggests layoffs remain limited, but economists noted that new hiring remains weak as businesses stay cautious amid slower demand and policy uncertainty.

In energy data, US natural gas inventories rose by 74 billion cubic feet to 3,853 bcf for the same week, slightly above forecasts of a 71 billion cubic feet build. Storage levels now stand 0.8% above last year and 4.6% higher than the five-year average, reflecting ample supply and mild seasonal demand.

Takeaway: The US labour market remains stable but stagnant, while strong gas storage data underscores a well-supplied energy market ahead of winter.

WHAT HAPPENED OVERNIGHT

• US Stocks retreat as AI spending jitters and Fed caution weigh on sentiment
  • US stocks closed lower on Thursday, with the Nasdaq and S&P 500 leading declines as heavy selling in tech dragged markets down.
  • Meta plunged 11.3%, its sharpest one-day drop in three years, after projecting higher AI-related capital spending for 2026.
  • Microsoft fell 2.9% following record quarterly capex of $35 billion, warning of continued spending pressures.
  • Alphabet bucked the trend, gaining 2.5% after posting strong ad and cloud revenue growth that beat estimates.

• US Treasury yields climb as Fed signals caution on future rate cuts
  • The 10-year US Treasury yield rose above 4.1% on Thursday, extending gains for a second straight session as investors digested the Fed’s hawkish post-meeting tone.
  • Chair Powell signalled uncertainty about further easing in December, citing persistent core inflation above 3%.
  • Traders trimmed bets on additional cuts this year, pushing yields higher across the curve.

• US Dollar climbs as Fed signals caution and US–China trade truce lifts sentiment
  • The dollar index rose to 99.5 on Thursday, marking its second straight session of gains, after Fed Chair Jerome Powell downplayed prospects for further rate cuts this year.
  • Powell’s remarks signalled a more data-dependent approach, boosting demand for the greenback.
  • The dollar also drew support from the US–China trade truce, as Washington reduced tariffs by 10% to 47% and Beijing pledged to curb fentanyl exports and boost US agricultural imports.

• Crude oil prices steady as trade truce optimism offsets supply worries
  • Brent crude oil prices held steady after President Donald Trump and Chinese President Xi Jinping agreed to lower tariffs, raising hopes for easing trade tensions.
  • Brent crude inched up 0.1% to $65.00 per barrel, while WTI crude rose 0.1% to $60.57 per barrel.
  • Gains were capped by concerns about sluggish demand and ample supply from OPEC+ producers.
    

Day’s Ledger

Economic Data

• Fed Balance Sheet
• Japan Sep Unemployment Rate 
• Euro Oct CPI Flash
• India Sep Fiscal Deficit data
• India Bank Loan-Deposit Growth Data
• India FX Reserves 
• Canada Aug GDP

Corporate Actions

• Jul-Sep Earnings: ACC, Bank of Baroda, Bharat Electronics, BPCL, GAIL India, Godrej Consumer, Maruti Suzuki, Patanjali Foods, Phoenix Mills, Shriram Finance, Vedanta
• Dr Lal Path Labs to consider bonus share issue
• GIC Housing to consider fund raising 
• Shriram Finance to consider fund raising

Policy Events

• Fed Bostic Speech
• Fed Hammack Speech
• Fed Logan Speech
  
  
  

Tickers to Watch

• DABUR launches ₹5 billion fund to invest in online-first brands
  
• Dabur’s Q2 profit climbs 6.5% to ₹4.44 billion on strong demand
  
• Cipla’s quarterly profit up 4% as revenue hits ₹75.89 billion record
  
• Hyundai Motor posts 14.3% profit surge in Q2 on exports, cost control
  
• Swiggy cuts loss to ₹10.92 billion, boosted by Instamart performance
  
• Adani Power’s Q2 profit dips 11% to ₹29.52 billion with flat revenue
  
• Groww plans ₹66.32 billion IPO valuing firm at about $7 bn; sets ₹95–100 band
  
• Lupin arm rolls out VitaLyfe, an AI-powered heart health app
  
• Strong orders and asset sales seen lifting L&T valuation prospects
  
• Bharat Electronics wins new deals worth ₹7.32 bln since Oct 22
  
• Reliance arm joins hands with Google for AI tools; Jio users to get Gemini access
  
• Motilal Oswal’s Q2 profit slumps 68% YoY amid lower income
  
• TCS to digitise Tata Motors’ ESG reporting under five-year pact

MUST READ

• Biggest challenge is educating informal sector, says PFRDA chief
• FM Sitharaman starts Bhutan tour to strengthen bilateral economic ties
• China to buy 12 million metric tonnes of soybeans this season, says Bessent
• Unused funds sign of sector maturing, lot of room for growth: PE chiefs
• Worst is over but liquidity support remains a key concern, say MFI chiefs
• The ECB and Fed Are Going in Different Directions. Can It Last?
• Trump Meets With Xi, Declares Immediate Cut to Tariffs
• US Halts Trade Blacklist Expansion in Truce With China
• Digital Euro Pilot Phase Could Start as Soon as 2027, ECB Says
  
  

See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

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