Global Mood: Cautiously risk-off
Drivers: South Korea Tech Sell-off, US-Iran Diplomatic Efforts, Gulf Shipping Risks

Asian markets were mixed on Tuesday, with South Korea leading losses as technology stocks came under pressure. The Kospi fell 3.28% in early trade, while Samsung Electronics dropped 4.37%. Australia’s S&P/ASX 200 rose 0.22%, while Japan’s markets were closed for a public holiday. Hong Kong’s Hang Seng futures pointed to a higher opening.

US equity futures edged higher, with Nasdaq-100 futures up 0.3% and S&P 500 futures gaining 0.1%, as investors assessed Apple’s quarterly results and awaited the US midterm elections. Apple fell 2% in extended trading after issuing a disappointing margin outlook and reporting weaker-than-expected iPad sales. The GIFT Nifty was trading at 23,543.5, up 141 points or 0.6%, pointing to a positive opening for Indian equities.

THE BIG STORY
Iran said negotiations through mediators were continuing after three days of talks in Doha ended without a breakthrough.  Tehran has condensed its seven-step proposal into a framework it says could be implemented within two days but continues to demand that Washington lift its port blockade and ease sanctions before nuclear talks resume. President Donald Trump signalled a willingness to reach a deal and cast doubt on renewed military action after the US midterm elections. 

However, a Wall Street Journal report said the US had struck Iran's Qeshm Island, highlighting the risk of further escalation despite diplomatic overtures. Iran's proposal includes reopening the Strait of Hormuz, a key condition for restoring energy flows disrupted by the conflict. 

Oil prices fell nearly 4% on Monday on hopes of a diplomatic solution, although Iranian sources viewed a renewed US attack as more likely than a deal. A Qatari LNG tanker was struck by unidentified objects in the Gulf, underscoring the threat to energy shipping. China and Russia urged diplomatic efforts and called for regional energy and shipping security to be protected.

The US plans to host trilateral talks between Ukraine and Russia in Abu Dhabi on November 10-11, covering a possible end to the war, post-war security guarantees, de-escalation and humanitarian measures. US officials are also due to meet European partners in Brussels to discuss Ukraine's security guarantees, Europe's future security framework and reconstruction support. However, Moscow and Kyiv remain far apart on the terms of a potential peace agreement.

Data Spotlight
US manufacturing activity strengthened in October, with the ISM Manufacturing PMI rising to 55.5 from 54.5 in September, beating expectations of 54.6. The index recorded its second-fastest pace of expansion in nearly four years, supported by stronger production, which climbed to 59.0 from 56.7, and a modest increase in new orders to 55.5. 

Employment growth moderated slightly to 52.4. The prices index declined to 75.2 from 77.9 but remained elevated, indicating persistent input-cost pressures. Demand from AI, data centres, semiconductors and infrastructure continued to support activity.

US construction spending unexpectedly fell 1.9% month-on-month to an annualised 2.186 trillion dollars in September, its steepest decline since April 2020, against expectations of a 0.4% increase. 

China's RatingDog Manufacturing PMI edged down to 52.0 in October from 52.1 in September but exceeded expectations of 51.6, extending the sector's expansion streak to 11 months. Output grew at its fastest pace in six months, supported by stronger new orders and rising overseas demand. Purchasing activity increased, while supplier delivery times shortened. 

Input cost inflation eased and selling prices declined amid intense competition. However, business confidence fell to a nine-month low amid concerns over input costs and competitive pressures.

Takeaway: The US manufacturing survey points to resilient industrial activity, particularly in AI- and infrastructure-linked sectors, but elevated input prices remain an inflation risk. The sharp fall in construction spending suggests weakness in another part of the economy. China's manufacturing sector continued to expand, supported by stronger output and overseas demand, although falling selling prices and weaker business confidence point to an uneven recovery.

WHAT HAPPENED OVERNIGHT

US stocks mixed as AI spending concerns persist; Nasdaq falls 1.07%

• The S&P 500 fell 0.51% to 7,541.40 on Monday, while the Nasdaq dropped 1.07% to 25,164.32. The Dow rose 0.41% to 51,983.98 as investors remained cautious over AI-related spending and awaited the US midterm elections.
• Oracle dropped nearly 9% after announcing plans to raise $20 billion through debt and share sales, reviving concerns over debt-funded AI infrastructure spending. Intel fell 8.8%, extending Friday's 29% decline.
• Chip stocks remained under pressure, with AMD falling 7.5% ahead of its results, while Marvell Technology plunged 13% after announcing a $115 billion all-stock acquisition of Lumentum. Lumentum fell 18.6%.
• Brent crude prices fell on optimism over a potential US-Iran peace agreement, easing inflation concerns and pushing longer-dated US Treasury yields lower. The energy sector declined 4%.
• The Nasdaq had fallen 5.3% in October amid concerns that AI infrastructure investment was outpacing near-term cash generation. The S&P 500's valuation declined to around 19 times expected earnings, its lowest since 2023.

US Dollar Extends Losing Streak as Oil Slump and Central Bank Decisions Weigh

• The US dollar index traded around 101.6 at the start of November, extending its decline to a fourth consecutive session after gaining 0.4% in October.
• The greenback came under pressure from falling oil prices amid growing hopes of a diplomatic resolution to the US-Iran conflict, easing concerns over energy-driven inflation.
• Investors are positioning for an event-heavy week, with the US midterm elections, jobs report and interest rate decisions from central banks in the UK, Australia, Norway and Sweden in focus.
• Markets continued to price in a 75% probability of a 25-basis-point Federal Reserve rate hike in December, despite the central bank holding rates steady last week.
• The Bank of England, Reserve Bank of Australia and Sweden's Riksbank are expected to raise interest rates this week, contrasting with the Fed's current pause.

US Treasury Yields Fall to Seven-Week Low as Oil Prices Ease Inflation Concerns

• The US 10-year Treasury yield fell to 4.89% on Monday, its lowest level since mid-September, as a sharp decline in oil prices eased concerns over energy-driven inflation.
• Hopes of a diplomatic resolution to the US-Iran conflict also supported bond prices. Reports that President Donald Trump wanted to allow more time for negotiations and that Iran's Supreme Leader had authorised talks eased concerns over further supply disruptions.
• Lower crude prices and reduced geopolitical risks offered some relief on the inflation front, although the outlook remains uncertain.
• Investors are focused on the US midterm elections and key economic releases, including the jobs report, this week for further clues on the Federal Reserve's policy outlook.
• The Fed held rates steady last week, but markets continued to price in a 75% probability of a 25-basis-point rate hike in December.

Oil Slumps More Than 7% as Iran Signals Openness to Peace Talks

• Brent crude fell 7.63% to $104.77 a barrel on Monday, while US WTI dropped 7.36% to $96.46, as diplomatic efforts to end the US-Israeli war with Iran raised hopes of stabilising Gulf oil supplies.
• Iranian President Masoud Pezeshkian said Supreme Leader Ayatollah Mojtaba Khamenei had granted the government certain authorities for peace talks, adding that Tehran would seek to resolve the conflict through dialogue.
• Iranian and Qatari officials held discussions aimed at ending the war, while US President Donald Trump said an agreement with Iran could happen. Qatari mediators also travelled to Tehran for further talks.
• The sharp decline reversed some of October's rally, when Brent rose 13.6% and settled at a six-month high amid fears of further escalation and attacks on tankers in the Strait of Hormuz.
• ADNOC CEO Sultan Al Jaber said global inventories had been depleted by nearly 1 billion barrels since the war disrupted shipping through the Strait of Hormuz, highlighting the scale of supply losses.
• Despite hopes for a diplomatic breakthrough, risks remain. Goldman Sachs warned Brent could reach $140 in 2027 if Gulf oil production remains 3.5 million barrels per day below its 2025 average. Attacks on shipping and energy infrastructure remain key upside risks.

Day’s Ledger*

Economic Data

• US October S&P Global Manufacturing PMI
• US September JOLTS Job Openings

Policy

• Reserve Bank of Australia Interest Rate Decision
• Bank of Canada Governor Macklem Speaks
• German Buba President Nagel Speaks

Corporate Actions

• Earnings: Bajaj Finserv, Bata India, Max India, Mahanagar Gas, State Bank of India, Utkarsh Small Finance Bank

Tickers to Watch

• PETRONET LNG July-September 2026 standalone net profit up 9.1% QoQ to 12.354 billion rupees from 11.32 billion rupees. Revenue up 29.6% to 72 billion rupees. EBITDA up 8.6% to 16.63 billion rupees. Margin narrowed to 23% from 28%.
• MARICO July-September 2026 consolidated net profit up 29.2% YoY to 5.58 billion rupees. Beats the 5.33-billion-rupee estimate. Revenue up 13% to 38.97 billion rupees. Misses the 40.48-billion-rupee estimate. EBITDA up 26.6% to 7.09 billion rupees. Beats the 6.99-billion-rupee estimate. Margin at 18% vs 16%, ahead of the 17.3% estimate.
• CONTAINER CORPORATION OF INDIA July-September 2026 net profit down 6.8% YoY to 3.53 billion rupees from 3.79 billion rupees. Revenue up 1% to 23.79 billion rupees. EBITDA down 4.5% to 5.5 billion rupees. Margin falls to 23% from 25%.
• GUJARAT STATE FERTILIZERS & CHEMICALS July-September 2026 net profit down 38.2% YoY to 2.002 billion rupees from 3.241 billion rupees. Revenue up 48.8% to 47.41 billion rupees from 31.87 billion rupees.
• IDBI BANK Employees and officers begin a two-day nationwide strike on November 2. They oppose the proposed sale of a controlling stake to Canada's Fairfax Financial Holdings. Protests run across branches and offices on November 2 and 3.

Must Read

• Skill Development, Corporate Affairs ministries top H1 FY27 underspenders
• India assures commitment to lower Scotch tariffs under UK trade pact
• IT and ITeS Policy of Uttar Pradesh, 2022: Incentives, eligibility and implementation
• India, EU discuss FTA implementation issues ahead of signing in December
• India's consumers are back, but its stock market is still lagging
• India markets regulator issues rules for depositary receipts on REITs, InvITs units
• India's IndiGo may fast-track some overseas growth as westward flights disrupted
• How does India tax equity investors?
• Banking Reform: Can Another Committee See Beyond Regulatory Silos?
• Learning To Live Sustainably: A Lesson From A Jaipur School
• Can Indian IT Find its Next Growth Engine Before AI Changes the Rules?
• Market Vigilantes and Central Bank Mandates
• A Divided Washington May Offer Markets Little Relief
• Rising Reserves Need a Closer Reading

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.