Risk-Off Mood Persists Despite Nikkei’s Record High

GLOBAL MOOD: Risk-off
Drivers: US Government Shutdown, US Fed Policy Uncertainty, Geopolitical Risk

Global markets reflected a mixed tone Monday--Japan’s Nikkei surged on political optimism, but broader sentiment stayed risk-off as investors weighed Middle East tensions, Fed policy uncertainty, and US government shutdown.

TODAY’S WATCHLIST 
 - ECB President Lagarde Speaks
 - BoE Governor Bailey Speaks

THE BIG STORY
Israeli planes and tanks carried out overnight and Sunday strikes across the Gaza Strip, destroying multiple residential buildings and deepening the humanitarian crisis, even as Palestinians pinned hopes on a US brokered ceasefire. President Donald Trump stated on Truth Social that Israel had agreed to an “initial withdrawal line” and that the ceasefire would be “IMMEDIATELY effective” once Hamas confirmed, offering a potential pause to the conflict after days of heavy bombardment.

Meanwhile, the US Federal Reserve remains divided over its policy path. Governor Stephen Miran reiterated calls for aggressive rate cuts, citing economic headwinds from Trump administration policies, while Chicago Fed President Austan Goolsbee and other officials urged caution, warning that inflation in services remains elevated. Goolsbee noted that the central bank faces a “sticky spot,” balancing slower payroll growth with persistent inflation pressures, highlighting the challenge of calibrating rate cuts without destabilising price stability.

Data Spotlight
US services sector activity stagnated in September as new orders slowed sharply, highlighting ongoing weakness in the labor market amid softer demand and supply of workers. The Institute for Supply Management reported its nonmanufacturing PMI fell to 50, the breakeven level, from 52.0 in August, below economists’ expectations of 51.7. While ten service industries, including public administration, wholesale trade, and utilities, reported growth, seven sectors including mining, construction, and retail trade contracted. Input prices for services remained near three-year highs, signalling persistent cost pressures even as overall activity stalled.

Takeaway: The ISM services data underscores a fragile US labour market and sluggish demand, suggesting that the Fed may maintain a cautious approach to future rate cuts despite elevated input costs.

WHAT HAPPENED OVERNIGHT

• US Stocks mixed, S&P 500, Dow close at record highs amid rate cut hopes
  • S&P 500 closed at a record high despite a volatile session, supported by sustained expectations of Federal Reserve rate cuts.
  • The Dow also notched a record closing high, while the Nasdaq ended lower.
  • Technology stocks were weighed down as Applied Materials projected a $600 million hit to fiscal 2026 revenue, with Tesla shares down 1.4%.
  • Utilities led sector gains in the S&P 500, rising 1.2% amid the ongoing US government shutdown.

• US Treasury yields steady amid government shutdown concerns
  • 10-year US Treasury yield remained at 4.1%, down 7bps for the week.
  • Growth worries and a weakening labour market weighed on yields.
  • Ongoing government shutdown delayed key economic data, including September’s jobs report.

• US Dollar slides amid government shutdown uncertainty
  • The US dollar index fell 0.1% to 97.69 on Friday.
  • Multi-week losses came as a government shutdown delayed key economic data, including payrolls.
  • Euro strength contributed to the dollar’s decline.
  • The dollar index was down 0.5% for the week, marking its weakest weekly performance since July.

• Crude oil prices edge up on Friday amid OPEC+ supply concerns
  • Brent crude oil prices settled up 0.7% at $64.53 a barrel.
  • US WTI crude rose 0.7% to $60.88 a barrel.
  • Gains capped by potential OPEC+ output increases, pushing weekly losses to 8.1%

Day’s Ledger

Economic Data

• India S&P September Services PMI
• UK S&P September Construction PMI

 Corporate Actions

• Shradha Infraprojects to consider fund raising
• Excel Realty N Infra to consider fund raising

Policy Events

• ECB's De Guindos Speaks
• ECB's Lane Speaks
• ECB President Lagarde Speaks
• BoE Gov Bailey Speaks

Tickers to Watch

• ADITYA BIRLA LIFESTYLE BRANDS: Flipkart to sell 6% stake (~$112 mn) via block deal.
• ALLCARGO LOGISTICS: Subsidiary files EOW complaint against CEO and client promoter for alleged offences.
• AU SFB: Deposits up 20.8% to ₹ 1.32 trillion; advances up 22.4% to ₹ 1.17 trillion; CASA ratio down to 29.4%.
• AVENUE SUPERMARTS: Revenue up 15.4% to ₹ 162.2 billion; store count 432 as of Sept 30.
• BAJAJ FINANCE: AUM up 24% to ₹ 4.62 trillion; new loans up 26% to 12.17 m; deposits up 5.5% to ₹ 697.5 billion.
• BAJAJ HOUSING FINANCE: Disbursements up 32.3% to ₹ 159 billion; AUM up 24% to ₹ 1.26 trillion; loan assets up 25.8% to ₹ 1.13 trillion.
• BANDHAN BANK: Loans up 7.2% to ₹ 1.4 trillion; deposits up 10.9% to ₹ 1.57 trillion; CASA ratio down to 28%.
• BANK OF BARODA: Global business up 10.5% to ₹ 27.79 trillion; advances up 11.9% to ₹ 12.79 trillion; deposits up 9.3% to ₹ 15 trillion.
• CEIGALL INDIA: Wins ₹ 71.2 billion and ₹ 59.7 billion solar project orders under Maharashtra’s Saur Krushi Vahini 2.0 scheme.
• EQUITAS SFB: Advances up 8.6% to ₹ 391 billion; deposits up 10.9% to ₹ 441 billion; CASA up 12.8% to ₹ 136 billion.
• FORCE MOTORS: September sales up 1.8% to 2,610 units YoY.
• HDFC BANK: Gross advances up 9.9% to ₹ 27.69 trillion; average deposits up 15.1% to ₹ 27.1 trillion; CASA deposits rise 8.5% to ₹ 8.7 trillion.
• HINDUSTAN ZINC: Refined zinc up 2% to 202 kt; lead –29% to 45 kt; mined metal up 1% to 258 kt.
• IDBI BANK: Business up 12% to ₹ 5.33 trillion; deposits up 9% to ₹ 3.03 trillion; advances up 15% to ₹ 2.3 trillion.
• INDUSIND BANK: Net advances down 8% to ₹ 3.27 trillion; deposits fall 5% to ₹ 3.89 trillion; CASA ratio drops to 30.8%.
• INFOSYS: Partners with Telenor Shared Services to deploy Oracle Cloud HCM for HR process standardisation.
• KOTAK MAHINDRA BANK: Net advances up 15.8% to ₹ 4.62 trillion; total deposits up 14.6% to ₹ 5.28 trillion; CASA up 11.2% to ₹ 2.23 trillion.
• L&T FINANCE: Retail loan book up 17.4% to ₹ 1.04 trillion; disbursements up 25% to ₹ 188.5 billion; retailisation at 98%.
• MARICO: Sees stable domestic demand; GST rate cuts aid 30% of India business; international growth in 20s range.
• MOIL: September output at record 1.52 lakh tonnes (up 3.8% YoY); core drilling up 46%.
• PNB: Global business up 10.6% to ₹ 27.87 trillion; deposits up 10.9% to ₹ 16.17 trillion; advances up 10.3% to ₹ 11.7 trillion.
• SOBHA: Sales up 61.4% to ₹ 19 billion; new sales area up 50% to 1.39 m sq ft; avg price ₹ 13,648/sq ft.
• SURYODAY SFB: Advances up 23% to ₹ 115 billion; deposits up 35% to ₹ 120 billion; disbursements up 49% to ₹ 24.3 billion.
• UCO BANK: Business up 13.3% to ₹ 5.37 trillion; advances up 16.7% to ₹ 2.31 trillion; deposits up 10.9% to ₹ 3.06 trillion.
• VEDANTA: Aluminium output up 1% to 617 kt; zinc metal –6% to 246 kt; silver –22% to 144 kt.
• YES BANK: Loans up 6.5% to ₹ 2.5 trillion; deposits up 7.1% to ₹ 2.96 trillion; CASA ratio 33.8%.

 MUST READ

• Guardrails Key as India Pushes Rupee Abroad
• Indian Exports May be More than Just Faltering 
• Rupee’s Strategic Faultline-SWOT analysis
• Unguarded Lending Won’t Fix Investment Demand
• India’s Growth Story Meets Its Consumption Wall
• The ABC and D of Bihar Elections
  Supreme Court’s Ruling May Set the Course for Land Justice in Bihar
• Jaguar Land Rover Readies £500 Million Supplier Loan, Times Says
• Indian IPO Market Set for Record Month With $5 Billion in Deals
• India's energy sector battles taxes, global turmoil

See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

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