Global Mood: Cautiously risk-on
Drivers: Iran-US negotiation deadlock, US-Russia talks, Houthi attacks on Saudi Arabia 

Asian markets advanced Wednesday, led by South Korea and Japan, as renewed optimism about artificial intelligence-related investments lifted tech stocks. South Korea’s Kospi rose 2.84% to 5,710.25, while Japan’s Nikkei 225 gained 1.40% to 64,972.67. Australia’s S&P/ASX 200 edged lower. US equity futures also rose, with Nasdaq-100 futures up 0.8% and S&P 500 futures up 0.3%, as investors assessed corporate earnings for signs that AI-related spending can sustain growth.

Technology stocks found support from strong earnings reported by companies benefiting from the AI boom, reviving appetite for growth-oriented assets after recent concerns over valuations and returns on AI investment. However, Brent crude remained near $109 a barrel amid uncertainty over efforts to end the US-Iran war, keeping energy supply risks and inflation concerns in focus. The GIFT Nifty was trading at 23,025.5, up 91 points or 0.40%, pointing to a positive opening for Indian equities.

THE BIG STORY
Hormuz reopening talks remain deadlocked over sanctions and nuclear demands, with Tehran wary of renewed US-Israeli strikes ahead of the US midterms. Iran's inflation hit 73.6% in September, while the rial has weakened nearly 35% since July.

Egypt has offered military support to Saudi Arabia as Houthi attacks intensify, raising risks to regional security and shipping routes. Iran's offer to mediate between Saudi Arabia and the Houthis remains unanswered.

US envoy Steve Witkoff will meet with Vladimir Putin after talks with Zelenskiy reported progress toward a peace framework. Russian strikes continue to disrupt Ukrainian power supplies, while Ukraine has resumed attacks on Russian refineries amid strained US-Ukraine ties.

Data Spotlight
UK unemployment fell to 4.7% in the three months to August 2026, below expectations of 4.9% and the lowest since July 2025.  The number of unemployed people declined by 47,000 to 1.712 million, while employment rose by 102,000 to 34.577 million. The employment rate increased to 75.3%, pointing to a stronger-than-expected labour market.

US housing starts fell 5.2% month-on-month to an annualised 1.221 million in September, marking a third consecutive monthly decline and missing expectations of 1.30 million.  Single-family starts dropped 4.6% to a one-year low, while multi-family starts declined 7.2%. Elevated mortgage rates and sluggish demand continue to weigh on construction activity.

US pending home sales plunged 7.3% month-on-month in September, hitting a record low and sharply exceeding expectations for a 0.5% decline.  Sales fell across all four regions, led by declines in the West and South, as rising mortgage rates and deteriorating affordability discouraged buyers.

Takeaway: The fall in UK unemployment points to continued labour-market resilience, although the wider employment picture remains mixed. In the US, stronger industrial output contrasts with a sharp deterioration in housing demand as elevated mortgage rates weigh on affordability. The data highlight the challenge facing policymakers: inflation risks remain persistent, while interest-rate-sensitive sectors are showing signs of strain.

WHAT HAPPENED OVERNIGHT

US Stocks Mixed as Healthcare Leads Rotation Away from AI Trades

• Wall Street ended mixed on Tuesday, with the Dow rising 1.02% to 52,495.88 and the S&P 500 gaining 0.28% to 7,712.57, while the Nasdaq slipped 0.02% to 26,424.82.
• Healthcare stocks led gains, with the sector hitting a record high as investors rotated away from technology amid concerns over AI spending and companies’ ability to monetise their investments. The value index rose 0.9%, outperforming growth, which fell 0.2%; the small-cap Russell 2000 gained 1.7%.
• Technology shares fell 0.3%, while communication services declined 0.9%, weighed down by losses in Netflix, Meta Platforms and Alphabet. Investors awaited quarterly results from Meta and Tesla on Wednesday.
• General Motors fell 6.8% after warning of cost pressures from higher commodity prices and weaker truck sales. 
• Financial services gained 1%, while real estate rose 1.7% and utilities advanced 1.2%. 
• Energy stocks underperformed as oil prices eased from a five-month high amid assessments of diplomatic developments involving Iran and continued risks to Gulf infrastructure and shipping.

US Dollar Slips to Three-Week Low on Weak US Housing Data

• The dollar index fell to 101.5 on Tuesday, its lowest in about three weeks, pressured by weaker oil prices on hopes of a diplomatic resolution to the Iran war and disappointing US housing data.
• US housing starts fell 5.2% in September, while pending home sales dropped to a record low, highlighting the impact of elevated mortgage rates on housing demand.
• Markets widely expect the Federal Reserve to hold rates at next week’s meeting, while pricing in a 25-basis-point hike in December.
• The euro recovered as unrest in France eased, while the yen strengthened, snapping a two-day losing streak after an auction of longer-dated Japanese government bonds drew record demand.

US Treasury Yields Fall on Lower Oil Prices, Weak Housing Data

• The US 10-year Treasury yield fell nearly 5 basis points to 5.09% on Tuesday, hovering near one-month lows as oil prices declined on hopes of a diplomatic resolution to the Iran war and weak housing data added to growth concerns.
• Investors weighed persistent inflationary pressures ahead of next week’s Federal Reserve meeting. Markets widely expect rates to remain unchanged in October but anticipate a 25-basis-point hike in December.
• The two-year Treasury yield edged down to 4.76%, while the 30-year yield fell to 5.42%, reflecting declines across the curve.

Oil Retreats From Five-Month High as Iran-Pakistan Talks Raise Hopes

• Brent crude fell 0.69% to settle at $108.79 a barrel on Tuesday after touching $111.99, its highest in five months. 
• US WTI’s expiring November contract dropped 1.8% to $101.79, while the more active December contract fell 72 cents to $97.82.
• Prices eased as traders assessed mediation efforts following a meeting between Iranian President Masoud Pezeshkian and Pakistan’s army chief Asim Munir in Tehran. 
• Pakistan had brokered an interim peace agreement in June, but it quickly unravelled amid renewed fighting.
• Supply risks persisted as Yemen’s Iran-aligned Houthis claimed attacks on Saudi energy, airport and military targets. 
• At least 18 vessels were reportedly attacked over two weeks, keeping a risk premium in oil prices amid concerns over Gulf shipping and energy flows.
• Potential increases in diesel supply offered some relief, with Russian cargoes returning to traditional destinations after the US suspended sanctions and an export ban was lifted. 
• Washington is also working with domestic refiners to increase output and push shuttered refineries to reopen.
• A Reuters poll of eight analysts estimated US crude inventories fell by around 800,000 barrels in the week ended October 16. Hopes for diplomatic progress and persistent risks to regional oil supplies continue to trap the market.

Day’s Ledger*
Economic Data

• UK September CPI Data
• US Crude Oil Inventories Data

Policy

• RBI MPC Meeting Minutes
• ECB's Lane Speaks
• German Buba President Nagel Speaks
• BoE Gov Bailey Speaks
• German Buba Mauderer Speaks
• ECB President Lagarde Speaks 

Corporate Actions

• Earnings: Aditya Birla Sun Life AMC, Adani Green Energy, Eternal, Indian Hotels Company, KEI Industries, M&M Financial Services

Tickers to Watch

• PIRAMAL FINANCE net profit rose 67% y/y to 5.45 billion rupees in the July-September quarter, while net interest income grew 35% to 15.30 billion rupees. AUM increased 24% to 1.13 trillion rupees; the company appointed former SBI chairman Dinesh Khara as an independent director for five years.
• L&T TECHNOLOGY SERVICES net profit rose 53.7% sequentially to 5.48 billion rupees in the July-September quarter, while revenue grew 3.4% to 30.40 billion rupees. EBIT increased 7.7% to 4.97 billion rupees, and the company targets annual revenue growth of 13–15% over five years.
• HINDUSTAN ZINC net profit surged 142% y/y to 64.12 billion rupees in the July-September quarter, while revenue rose 76.5% to a record 150.93 billion rupees. EBITDA more than doubled to 92.48 billion rupees, and mined metal production rose 5% to a record second-quarter high of 271,000 tonnes.
• WAAREE RENEWABLE TECHNOLOGIES net profit fell 30% y/y to 820 million rupees in the July-September quarter, while revenue rose 36.5% to 10.58 billion rupees. The unexecuted order book exceeded 55 billion rupees.
• IREDA net profit edged up 0.5% y/y to 5.52 billion rupees in the July-September quarter, while operating profit rose 16.5% to 9.04 billion rupees. Gross NPA eased to 3.57% from 3.76%, and net NPA fell to 1.08% from 1.23%.
• BAJAJ FINANCE consolidated net profit rose 28.8% y/y to 63.67 billion rupees in the July-September quarter, while net interest income grew 23.6% to 133.35 billion rupees. AUM increased 26% to 5.85 trillion rupees, with 13.45 million new loans booked during the quarter.
• NELCO net profit rose 6.8% y/y to 17.3 million rupees in the July-September quarter, while revenue grew 5.1% to 781.4 million rupees. EBITDA increased 22% to 91 million rupees, with margin expanding to 11.7% from 10%.
• TRENT non-executive director Harish Bhat resigns after more than 12 years on the board, effective Oct 17, citing increased professional and personal commitments.

Must Read

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• US envoy Witkoff to meet Putin, Trump presses Kyiv to settle
  
• Secy of State Marco Rubio: India-US trade deal weeks away, 99% of work done 

 

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day