Global Mood: Cautiously risk-on
Drivers: Fed holds rates, Russia-Ukraine talks, Energy-driven price pressures 

On Thursday, investors assessed contrasting earnings from US technology giants, resulting in mixed performance in Asian markets. Japan’s Nikkei 225 rose 0.58%, the Topix was flat, and South Korea’s Kospi gained 0.11%, while the Kosdaq fell 0.97%. Australia’s S&P/ASX 200 advanced 0.51%. US equity futures declined, with Nasdaq-100 futures down 1.2% and S&P 500 futures lower by 0.5%.

Microsoft rose 3% in after-hours trading after Azure growth helped it beat earnings and revenue estimates, while Alphabet fell 9% after missing earnings and revenue expectations and reporting negative free cash flow of 9.07 billion dollars. Alphabet maintained its full-year capital expenditure forecast of 195–205 billion dollars, keeping concerns over AI spending in focus. The GIFT Nifty was trading at 22,790.5, up 57.5 points or 0.25%, pointing to a mildly positive opening for Indian equities.

THE BIG STORY
The US Federal Reserve kept its policy rate unchanged at 3.75%–4.00%, citing elevated inflation and the need for more data before its December meeting.  Two policymakers dissented in favour of a 25-basis-point hike, while markets continued to price in further tightening amid persistent energy costs, strong consumer spending and AI-driven inflation pressures.

The Kremlin said the timing of the next round of US-mediated talks with Ukraine would depend on the conflict in West Asia and battlefield developments, casting doubt on a proposed November meeting in Abu Dhabi.  Moscow has not set a date, while disagreements persist over European participation in negotiations.

Elevated fuel prices and broadening price pressures are complicating the Fed's efforts to return inflation to its 2% target without slowing economic growth. 

Markets are pricing in an increased likelihood of another Fed rate hike in December, keeping US Treasury yields and the dollar sensitive to incoming inflation and growth data.

Data Spotlight
The US goods trade deficit widened to 134.9 billion dollars in September, the highest since March 2025, from a revised 132.1 billion dollars in August and above forecasts of 130 billion dollars.  Imports rose 2.4% to a record 344.15 billion dollars, led by capital and consumer goods, while exports increased 2.6% to 209.24 billion dollars.  The larger deficit reflects stronger import demand despite growth in exports.

The average US 30-year fixed mortgage rate fell to 7.37% in the week ended October 23, declining for a second consecutive week.  Mortgage applications rose 3.4% from the previous week, with refinancing applications up 3% and home-purchase applications increasing 4%. 

However, rates remained more than one percentage point above year-earlier levels, while rising home prices continued to weigh on affordability.

Takeaway: The wider US goods trade deficit reflects stronger imports, while the decline in mortgage rates offers some relief to housing demand despite continuing affordability pressures. The data point to resilient domestic demand, but high borrowing costs remain a constraint for interest-sensitive sectors.

WHAT HAPPENED OVERNIGHT

US Stocks Edge Higher as Fed Holds Rates; AI Earnings Drive Stock Moves

• US stocks closed higher on Wednesday after the Federal Reserve held interest rates steady, as expected. The Dow rose 0.19% to 52,475.10, the S&P 500 gained 0.28% to 7,743.97, and the Nasdaq advanced 0.27% to 26,549.85.
• The Fed upgraded its assessment of the economy but said inflation remained elevated. Markets raised the probability of a 25-basis-point rate hike in December to 85%, from 78.3% on Tuesday. US GDP and personal consumption expenditure inflation data due today could influence rate expectations.
• AI-linked stocks gained after South Korea’s SK Hynix reported a more than sevenfold jump in quarterly profit. Micron rose 5.9%, SK Hynix’s US-listed shares gained 13.3%, and the Philadelphia semiconductor index advanced 1.8%, extending its rally to four sessions.
• Microsoft rose more than 4% in after-hours trading after reporting quarterly results, while Alphabet fell more than 7% as investors assessed its earnings.
• Earnings remained broadly supportive, with 84% of the 200 S&P 500 companies that had reported beating consensus estimates, according to LSEG data. 
• Investors remained focused on whether heavy AI spending would translate into sustained growth.

US Dollar Slips as Fed Holds Rates, Offers No Clear Signal on December Move

• The US dollar index fell to 102.1 on Wednesday after the Federal Reserve held interest rates steady, with subtle changes to its policy statement interpreted as slightly dovish.
• The Federal Open Market Committee voted 10–2 to keep the federal funds rate at 3.75%–4%. Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, favouring a 25-basis-point increase.
• Policymakers gave no clear indication of whether rates could rise again in December, saying incoming economic data would guide future decisions as the Fed seeks to return inflation to its 2% target.
• Fed Chair Kevin Warsh said the FOMC would continue to meet eight times a year but plans to reduce the number of policy rate decisions to seven in 2027 and six in 2028.
• The announcement came less than a week before the November midterm elections, amid widespread public dissatisfaction with the economy.

US 10-Year Treasury Yield Holds Above 5% as Fed Offers Little Guidance on December Rates

• The US 10-year Treasury yield remained above 5% on Wednesday after the Federal Reserve held interest rates steady, while changes to its policy statement were interpreted as signalling a slightly more dovish stance.
• Polling points to a competitive political landscape, with Democrats holding an advantage in several key races.

Oil Rises as Yemen Fighting, Saudi Refinery Attack Renew Supply Concerns

• Brent crude rose 1% to settle at $115.32 a barrel on Wednesday, while US West Texas Intermediate gained 3% to $102.78, as escalating fighting in Yemen and an attack claimed by the Houthis on a Saudi refinery heightened concerns over supply disruptions.
• The Houthis said they struck Saudi Arabia’s Ras Tanura refinery, which has a capacity of 550,000 barrels per day. Saudi authorities did not immediately confirm the attack. 
• Renewed concerns about possible US strikes on Iran after the November 3 midterm elections also supported prices.
• US crude inventories fell by 1.9 million barrels in the week ended October 23, according to the Energy Information Administration, against analysts’ expectations of a 15,000-barrel build. The draw was broadly in line with the 2-million-barrel decline reported by the American Petroleum Institute.
• Qatar has presented Iran with a draft deal to end the eight-month conflict involving the US and Israel. 
• Tehran said it remained open to diplomacy, although a senior Iranian official described the proposals as unacceptable. The conflict has disrupted shipping and oil supplies across West Asia.
• OPEC+ is expected to keep December output targets unchanged at its Sunday meeting. 
• Meanwhile, Russian crude exports from Baltic and Black Sea ports could fall in November as domestic refiners increase diesel production, traders said.

Day’s Ledger*

Economic Data

• US September Core PCE Price Index
• US July-September GDP
• US Initial Jobless Claims
• US September Personal Spending
  

Policy

• ECB Interest Rate Decision
• BoC Deputy Governor Gravelle Speaks
• German Buba Mauderer Speaks
  
  

Corporate Actions

• Earnings: Ambuja Cements, Coal India Limited, Motilal Oswal Financial Services, Suryoday Small Finance Bank, Vedanta Power, Vedanta Oil and Gas.

Tickers to Watch

• JSW ENERGY July-September 2026 consolidated net profit up 49.8% YoY to 10.564 billion rupees. Beats the 6.89-billion-rupee estimate. Revenue up 23% to 63.685 billion rupees from 51.77 billion rupees. Beats the 56.3-billion-rupee estimate. EBITDA up 20.7% to 36.176 billion rupees from 29.98 billion rupees. Beats the 31.68-billion-rupee estimate. Adds 813 MW capacity, including 513 MW of organic renewable additions.
• BANDHAN BANK July-September 2026 net profit up 23.9% QoQ to 6.22 billion rupees from 5.02 billion rupees. NII up 1.3% sequentially to 29.604 billion rupees from 29.21 billion rupees. Gross NPA at 3.11% vs 3.15% in April-June 2026. Net NPA at 0.92% vs 0.93%.
• JIO PLATFORMS In focus a day after its market debut. Investors track post-listing performance after a listing premium of over 21%.

Must Read

• India, Mexico formally begin preferential trade agreement negotiations
• India's growth seen losing momentum after strong start to fiscal year: Poll
• Govt may ease FDI paperwork for entities with up to 10% LBC ownership
• India seeks $220 billion clean energy push to meet 2030 target
• India markets regulator weighs domestic AI model for securities trading, chairman says
• Indian stocks could see November rebound; oil, AI trade pose risks
• Indian gasoline demand to peak by 2035, says top refiner Indian Oil
• The Superficially Intuitive Case Against Capital Gains Tax
• FPIs Using Mauritius Face a Harder Tax Calculation in India
• Is Washington Trying to Inflate Away Its Debt?
• All That Stock Research May Be Answering the Wrong Investment Question

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day