Global Mood: Cautiously risk-on
Drivers: Weak US Jobs Dents Fed Hike Bets, Russia-Ukraine Strikes Spiral

Asian markets turned risk-on on Monday, tracking Wall Street gains as weaker US jobs data eased expectations of another Federal Reserve rate hike this month. Japan’s Nikkei 225 rose more than 1.7%, Topix gained 0.79% and Australia’s S&P/ASX 200 advanced 0.53%. SGX Nifty was up 167 points, or 0.74%, at 22,658, signalling a positive opening for Indian equities.

US payrolls rose by just 29,000, against expectations of 90,000, pulling October Fed hike odds down to 22.7% from 64.2% a week earlier. The softer data also helped US equities advance and Treasury yields retreat from recent highs. However, inflation remains at 3.4%, keeping the outlook uncertain ahead of October CPI data. Geopolitical risks remain elevated as Saudi-backed forces launch an offensive against Yemen’s Houthis, who threaten the Bab el-Mandeb shipping route. With Hormuz also disrupted, risks to energy supplies persist. Renewed Russia-Ukraine attacks add to uncertainty. 

THE BIG STORY
Saudi-backed government launched major offensive Sunday to retake Houthi-held territory, including Bab el-Mandeb strait seized last month. Saudi Arabia leading aerial campaign with US intelligence support; Yemeni forces on the ground. Houthis claimed missile and drone strikes on Saudi Aramco sites in Riyadh and Khurais in response to Houthis advancing on Taiz, threatening to besiege Yemen's third-largest city; three in four families in parts of Yemen facing hunger.

With Bab el-Mandeb now under Houthi control alongside Iran's grip on Hormuz, both key regional shipping chokepoints are simultaneously threatened.

September payrolls just 29,000 versus 90,000 expected; prior months revised lower. October Fed hike odds collapsed to 22.7% from 64% a week ago; December now the base case. Stocks rose, dollar slipped, 10-year Treasury yields pulled back from 24-year highs. Inflation still at 3.4%, well above target; October CPI the next key swing factor. Russia vowed to intensify strikes on Kyiv's military and defence industry after Zelenskiy pledged to double down on hitting Russian refineries. The strikes add to concerns over further disruption to energy infrastructure ahead of winter.

Data Spotlight
US non-farm payrolls rose just 29,000 in September, well below the 90,000 forecast and down from a revised 133,000 in August. July and August payrolls were revised down by a combined 60,000, pointing to a weaker labour market than previously reported. Job gains were led by healthcare (+17,000), construction (+11,000) and manufacturing (+9,000), while financial activities shed 7,000 jobs.

Employment was broadly unchanged across several major sectors, including retail, transport, information, professional services, leisure and hospitality, and government. The weak payroll print follows signs of a gradual cooling in labour demand, with job openings also recently falling to a five-month low.

Eurozone inflation accelerated to 3.8% in September from 3.2%, the highest since September 2023 and above the ECB’s 2% target. Eurozone energy inflation surged to 18.8%, while services inflation rose to 3.2% and unprocessed food inflation to 4.0%. Core eurozone inflation edged up to 2.5%, while inflation accelerated across major economies including Germany, France, Spain and Italy.

Takeaway: The US labour market is weakening more sharply than expected, with very low job creation and downward revisions strengthening the case for a more accommodative Fed stance. However, the inflation picture remains challenging, particularly in Europe, where West Asia-related energy price pressures have pushed headline inflation sharply higher. The divergence leaves central banks facing a difficult trade-off: weaker US employment reduces the case for further rate hikes, while renewed energy-driven inflation could limit the scope for easing globally.

WHAT HAPPENED OVERNIGHT

US stocks rally as weak jobs report slashes October Fed hike odds to 22.7%

• The Dow rose 0.49%, S&P 500 gained 0.73%, and Nasdaq climbed 1.19%.
• September payrolls rose by just 29,000, well below the 90,000 estimate, with prior months revised sharply lower.
• The weak jobs data pulled October Fed hike odds down to 22.7% from 64.2% a week earlier.
• The Russell 2000 gained 0.9%, its biggest daily advance in a month, as rate-sensitive small caps and real estate stocks benefited from the dovish repricing.
• Nvidia rose 1.3%, and Tesla gained 4.7%, with consumer discretionary leading S&P 500 sector gains at 1.4%; the Nasdaq secured a weekly gain, its fifth in six weeks.
• Nike stumbled 3.6% after forecasting a surprise steep drop in annual revenue on China weakness and announcing job cuts and a global business restructuring.
• Western Digital and Seagate both tumbled 10% after Nikkei reported Toshiba plans to double hard disk drive production capacity for AI data centres by fiscal 2027.
• For the week, the S&P 500 shed 0.27%, the Dow fell 1.26%, and the Nasdaq rose 0.45%.

US Treasury yields resume climb to 5.28% as weak jobs data offers only temporary bond market relief.

• The 10-year Treasury yield rebounded to 5.28% after falling as much as 8 basis points following the payrolls report.
• The weak jobs print offered only brief relief as unresolved West Asia tensions, fiscal concerns and resilient growth kept upward pressure on yields.
• The rise reflected a combination of Fed tightening expectations, energy-driven inflation risks and a deteriorating fiscal outlook.
• A decline in oil prices provided modest inflation relief, though the Iran conflict remains unresolved and keeps the energy price risk premium intact.

US Dollar slips below 102 as weak jobs report and falling oil ease near-term tightening bets.

• The dollar index fell below 102, snapping a four-session advance, as September payrolls of just 29,000 and an upward unemployment rate tick to 4.2% prompted money markets to scale back October hike expectations.
• Brent dropping below $100 added further relief, easing energy-driven inflation concerns at the margin.
• Despite Friday's pullback, the dollar remained on track for a 0.9% weekly gain, its third consecutive weekly advance.

Oil settles lower as Europe plans diesel reserve release, easing fuel-supply concerns.

• Brent slipped 0.06% to $102.25/bbl, while WTI fell 1.9% to $91.11, after EU countries agreed to release additional diesel stockpiles following a US request.
• France proposed releasing 50 million barrels of diesel from European reserves, with IEA members also considering a 50-million-barrel crude release, potentially easing tight refined-product markets.
• The focus is shifting from crude availability to refined-product supply as West Asia crude flows recover, while refinery disruptions in the region and Russia keep diesel markets tight.
• China also halted refined-fuel exports for October to preserve domestic stocks, limiting global product availability and partly offsetting the impact of European reserve releases.
• Ukraine said it struck oil facilities in Russia's Samara and Volgograd regions, adding to concerns over disruptions to Russian refining and fuel supplies.
• Barclays raised its fourth-quarter Brent forecast by $20/bbl to $115 and its 2026 forecast to $100, citing strong physical-market fundamentals, inventory draws and steep premiums for prompt cargoes.

Day’s Ledger*
Economic Data

• Germany September HCOB Services PMI
• Eurozone September HCOB Services PMI
• UK September S&P Global Composite PMI
• US September S&P Global Services PMI
• US September ISM Non-Manufacturing PMI

Corporate Actions

• Ola Electric Mobility to consider fundraising

Policy

• German Buba President Nagel Speaks
• ECB's Lane Speaks
• ECB's Schnabel Speaks

Tickers to Watch

• HDFC BANK appoints Anup Bagchi as MD & CEO for a three-year term. RBI approval brings an external candidate to the top job, ending months of leadership uncertainty.
• INFOSYS, WIPRO ADRs jump 8% in pre-market trade after Accenture's strong Q4 results, and an upbeat FY27 revenue outlook lifts global IT sentiment.
• UCO BANK July-September 2026 total business up 18.84% YoY to 6.37 trillion rupees. Advances up 24.68% to 2,880 billion rupees; deposits up 14.05% to 3,490 billion rupees.
• AUROBINDO PHARMA receives final USFDA approval to manufacture and market Pera panel tablets in six strengths (2mg-12mg).
• HINDUSTAN ZINC mined metal production up 5% YoY to 271 kilotonnes. Saleable metal production up 7% to 264 kilotonnes.
• NMDC September production up 7.7% YoY to 4.04 million tonnes. Sales fell 9.5% to 3.51 million tonnes.
• ICICI PRUDENTIAL LIFE INSURANCE appoints Siddhartha Mishra as MD & CEO for five years, as Anup Bagchi moves to HDFC Bank.
• BHARAT COKING COAL: September raw coal production up 20.7% YoY to 2.57 million tonnes. Coking coal output up 21.5% to 2.49 million tonnes; offtake up 13.7% to 3.15 million tonnes.
• MUTHOOT FINANCE appoints Alexander George as MD effective October 1, 2026, through March 31, 2031. George Alexander Muthoot is named Vice Chairman and Whole-Time Director for the same period.
• PNB receives SEBI administrative warning over alleged insider trading violations involving six individuals.
• INDIAN BANK July-September 2026 total business up 14.2% YoY and 4.4% QoQ to 15,960 billion rupees.
• BAJAJ FINANCE board approves preferential warrant issue worth up to 58 billion rupees.
• BANK OF BARODA global business up 17.45% YoY to 32,640 billion rupees as of September 30, 2026.
• IDBI BANK July-September 2026 total business up 18% YoY to 6,270 billion rupees.
• CANARA BANK domestic advances up 16.8% YoY to 12,630 billion rupees. Global business up 15.8% to 30,710 billion rupees; domestic deposits up 11% to 15,480 billion rupees from 13,950 billion rupees.

Must Read

• Case for a Hawkish 25-bps Hike
• The Banker HDFC Bank Found Across the Rivalry
• Three Years to Build a Global Bank?
• How China’s New Investment and Export Controls Jeopardise India’s Economic Choices
• Indian Diplomacy in Crisis Mode
• India’s Stocks Need More Than a Tax Cut

 (*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day