Global Mood: Cautiously risk-off
Drivers: Russia-Ukraine peace talks, Houthi attacks on Saudi Arabia

Asian markets traded mixed on Thursday as investors assessed third-quarter earnings from major US technology companies, including Meta Platforms and Tesla. South Korea’s Kospi fell 0.67%, while Japan’s Nikkei 225 rose 0.19% and Australia’s S&P/ASX 200 was flat. US equity futures declined, with Nasdaq-100 futures down 0.7%, S&P 500 futures falling 0.5% and Dow futures losing 0.3%, as investors weighed the latest results against concerns over elevated technology valuations and AI-related spending.

Meta shares rose 2% in extended trading after the company reported better-than-expected revenue and issued strong current-quarter guidance, while Tesla fell 3% despite beating earnings expectations. The mixed reaction highlighted investors’ high expectations for technology companies and growing scrutiny of returns on AI investments. The GIFT Nifty was trading at 22,703, down 25.5 points or 0.11%, pointing to a mildly negative opening for Indian equities.

THE BIG STORY
Vladimir Putin agreed to resume US-mediated trilateral peace talks with Ukraine, potentially from November 10, with discussions expected to focus on post-war security guarantees. However, Moscow remains dissatisfied with recent diplomatic proposals, while US-Ukraine ties remain strained.

The US has ordered non-emergency diplomatic staff and their families to leave Saudi Arabia following deadly Houthi attacks on Dammam airport and the Shaybah oilfield, heightening concerns over regional security and energy infrastructure.

Strong AI-related investment is adding to demand and price pressures, complicating the Fed's efforts to bring inflation back to its 2% target.  Further rate hikes could disproportionately hurt small businesses, indebted consumers and non-AI sectors, even as the AI boom supports economic growth.

Data Spotlight
The average US 30-year fixed mortgage rate fell 9 basis points to 7.41% in the week ended October 16, marking its first decline in 11 weeks as Treasury yields eased amid safe-haven demand and expectations of a Federal Reserve rate hold.  However, total mortgage applications fell 5.3% for a seventh consecutive week to their lowest since January 2025, with purchase applications down 7.3% and refinancing applications declining 2%.

US crude inventories fell by 3.061 million barrels in the week ended October 16, exceeding expectations for a 0.8-million-barrel draw.  Gasoline stocks also declined by 2.952 million barrels, while distillate inventories rose by 1.675 million barrels. Crude stocks at Cushing increased by 987,000 barrels, and refinery crude runs edged higher.

Takeaway: The first decline in US mortgage rates in 11 weeks offers limited relief to the housing market, as persistently high borrowing costs continue to weigh on demand. The sustained fall in mortgage applications suggests that affordability remains a constraint despite the recent easing in yields. Meanwhile, the larger-than-expected draw in crude and gasoline inventories points to tighter US oil-product balances, although rising distillate stocks provide a counterpoint. Energy-market developments remain important for the inflation outlook and the Federal Reserve’s policy decisions.

WHAT HAPPENED OVERNIGHT

US Stocks Higher as Spacex and Super Micro Revive AI Trade

• Wall Street closed higher on Wednesday, led by the Nasdaq, which rose 1.05% to 26,702.86. The Dow gained 0.69% to 52,856.09, and the S&P 500 advanced 0.58% to 7,757.17.
• Strong results from SpaceX and Super Micro Computer improved sentiment towards AI-related stocks, easing concerns over the sustainability of heavy infrastructure spending and returns on investment. 
• The S&P 500 technology index rose 1.6%, while the Philadelphia Semiconductor index gained 2%.
• Communication services fell 1.3%, limiting broader market gains. Netflix dropped 5.3% after issuing a weaker-than-expected fourth-quarter profit forecast, while AT&T sank 6.5% despite beating quarterly estimates, amid concerns over competition from SpaceX.
• Investors will look for further evidence from corporate results that AI spending can translate into sustainable profits.

US Dollar Stabilises as Rising Oil Revives Inflation Concerns

• The US dollar index steadied around 101.7 on Wednesday after hitting a three-week low in the previous session, supported by rising oil prices, renewed inflation concerns and safe-haven demand.
• Oil prices resumed their climb after a diplomat disputed reports of an imminent US-Iran agreement, although negotiations remain ongoing.
• Markets widely expect the Federal Reserve to hold rates next week, while pricing in the possibility of a rate hike in December.
• The yen traded in a narrow range as markets expected the Bank of Japan to hold rates next week before raising them in December.
• The euro stabilised after weakening earlier in the week amid unrest in France and other European countries, with widespread protests subsequently subsiding.

US Treasury Yields Hold Near 5.1% as Oil Fuels Inflation Concerns

• The US 10-year Treasury yield held around 5.1% on Wednesday as investors assessed the Federal Reserve’s policy outlook ahead of next week’s meeting.
• Markets priced in an 85% probability of the Fed holding rates steady next week, while assigning around a 75% chance of a 25-basis-point hike in December.
• Oil prices rose after fresh missile strikes targeted tankers in the Strait of Hormuz and Saudi energy facilities, renewing concerns over energy-driven inflation.
• Recent US housing data pointed to mortgage rates weighing on demand, while hotter-than-expected CPI and PPI readings last week signalled persistent inflationary pressures.
• Treasury yields remain below multi-decade highs reached earlier this month amid a global bond sell-off driven by energy inflation, mounting government debt and deteriorating fiscal conditions across major economies.

Oil Holds Steady as Ukraine Peace Talks Offset US Crude Stock Draw

• Brent crude edged up 3 cents to settle at $108.82 a barrel on Wednesday, while US WTI fell 0.7% to $97.15. Both benchmarks retreated from session highs after earlier gains of more than $2.
• Prices faced pressure after Russian President Vladimir Putin agreed to resume US-mediated peace talks with Ukraine as soon as next month. A potential deal could ease tight global diesel supplies and reduce pressure on crude prices.
• Supply risks in West Asia persisted as Iran ruled out dialogue with the US amid its blockade and threats. At least 18 vessel attacks were recorded over two weeks, with strikes extending beyond the Strait of Hormuz into the Gulf of Oman.
• US crude inventories fell by 3.06 million barrels to 412.5 million barrels last week, against expectations for a draw of 820,000 barrels, according to the Energy Information Administration.
• Distillate stocks, including diesel and heating oil, rose by 1.68 million barrels to 104.3 million barrels, defying expectations for a decline. The US also offered to loan nearly a third of its one-million-barrel emergency heating oil reserve to ease fuel shortages and contain prices.

Day’s Ledger*

Economic Data

• US Initial Jobless Claims
  
  

Policy

• BoE Governor Bailey Speaks

Corporate Actions

• Earnings: Adani Energy Solutions, Adani Total Gas, Chennai Petroleum Corporation, Colgate Palmolive (India), Hindustan Petroleum Corporation,

Tickers to Watch

• INDIAN HOTELS COMPANY July-September 2026 net profit up 19.5% YoY to 3.8 billion rupees from 3.18 billion rupees. Revenue up 21.7% to 24.84 billion rupees. EBITDA up 23.9% to 7.06 billion rupees. Margin contracts to 19.95% from 27.9%.
• KEI INDUSTRIES July-September 2026 PAT up 29.3% YoY to 2.624 billion rupees. Revenue up 38.5% to 37.764 billion rupees. EBITDA up 39.8% to 3.76 billion rupees. Margin at 10% vs 9.9%. Revenue beats the 34.42-billion-rupee estimate. PAT, EBITDA and margin miss estimates of 2.75 billion rupees, 3.95 billion rupees and 11.5%.
• ETERNAL July-September 2026 net profit up 35.9% QoQ to 1.25 billion rupees from 920 million rupees. Revenue up 19.4% to 241.38 billion rupees. EBITDA up 26.6% to 7.52 billion rupees. Margin at 3.1% vs 2.93%. Expects to cross 3,500 stores by March 2027. Current plans point to around 5,000 stores.
• TATA COMMUNICATIONS National Court of Spain rules for subsidiary Tata Communications (Spain). Annuls VAT demand of €15.51 million and penalty of €18.10 million. Case related to an input VAT refund claim.
• BEL Signs 7.7-billion-rupee contract with Ministry of Defence. Will supply LLLR-I radar systems to the Indian Army. Systems detect aerial threats, including small drones.
• PINE LABS Invests ~250 million rupees in wholly owned subsidiary Synergistic Financial Networks via rights issue of 49,869 shares. Funds working capital and growth. Subsidiary stays wholly owned.

Must Read

• Rubio’s Venezuelan Oil Proposal: Issues India Must Resolve Before Committing
• Nirmala Sitharaman, Retail Investors and the Great Indian Wealth Transfer
• India’s Record Remittances: A Warning, Not Just a Financial Windfall
• India’s Drug Pricing Dilemma: Can It Protect Patients and Innovate?
• IDBI Bank Sale: Public Ownership Must Serve a Purpose
• HDFC Bank investigates two senior executives over alleged leak of business secrets
• India's top industrial state asks factories to curb power usage as demand surges
• US orders some diplomats to leave Saudi Arabia as fears of escalating Houthi attacks rise
• Reliance says Ambanis and Rubio discussed global energy, data centres in visit
• Jio Platforms' IPO-linked inflows boost rupee; elevated oil prices spur caution

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day