Global Mood: Cautiously risk-on
Drivers: FOMC Meeting, Anthropic IPO, Elevated Oil Prices

Asian markets traded mostly higher on Tuesday, led by South Korea, as investors assessed corporate earnings and prepared for the US Federal Reserve’s policy meeting. South Korea’s Kospi rose 3.8% and the technology-focused Kosdaq gained 2.9%, while Japan’s Nikkei 225 advanced 1.7% and the Topix rose 0.4%. Australia’s S&P/ASX 200 bucked the trend, falling 0.32%. US equity futures were largely flat as investors awaited a busy slate of third-quarter earnings.

Technology stocks rebounded despite lingering concerns over heavy borrowing to finance artificial intelligence infrastructure. Investors are watching results from major companies, including Microsoft, Alphabet and Amazon, due later this week, for signs that AI spending is translating into sustainable growth. The Federal Reserve begins its two-day policy meeting on Tuesday and is widely expected to hold rates steady, with investors looking for guidance on the possibility of another rate hike before year-end. The GIFT Nifty was trading at 22,663.5, down 110 points or 0.48%, pointing to a negative opening for Indian equities.

THE BIG STORY
Saudi Arabia, Turkey and Pakistan held high-level talks with Iranian officials in Tehran to de-escalate the regional conflict and explore a non-aggression framework.  However, continued US-Iran tensions, disputes over sanctions and the nuclear programme, and threats to shipping through the Strait of Hormuz remain obstacles to a broader settlement.

The Houthis claimed attacks on Saudi Arabia's East-West oil pipeline pumping stations and Riyadh airport, although Riyadh had not confirmed the latest strikes. Saudi-led forces stepped up operations against Houthi missile infrastructure in Yemen, while Egypt's parliament authorised military support for Saudi Arabia. Escalating attacks threaten oil supply routes, including the Bab el-Mandeb Strait, as well as regional energy infrastructure.

Russian missile strikes on Kharkiv killed two people and injured four, damaging residential buildings. Additional Russian drone and artillery attacks hit Ukraine's Dnipropetrovsk region, underscoring the persistence of hostilities despite renewed diplomatic efforts.

Data Spotlight
The US Chicago Fed National Activity Index improved to +0.07 in September from -0.08 in August, indicating a pickup in economic activity. Production-related indicators and sales, orders and inventories supported the improvement, while personal consumption and housing weighed on the index. The three-month moving average rose to +0.03 from +0.01.

US Strategic Petroleum Reserve crude inventories fell to 282.6 million barrels in the week ended October 23, their lowest since October 1982. Stocks have declined by around 132.8 million barrels since the US-Israeli war with Iran began in late February, amid a broader release programme and an emergency exchange to address a refinery supply disruption.

Japan’s inflation for service producer prices accelerated to 3.7% year-on-year in September, its highest since June 2024, from 3.5% in August. Transport and postal services inflation climbed to 8.4% from 6.8%, while leasing and rental services prices rose 11.7%.  The index increased by 0.3% month-on-month, marking its third consecutive rise, as labour costs and elevated transport and fuel expenses sustained pressure.

Takeaway: US activity improved in September, although weakness in consumption and housing points to uneven growth. Falling Strategic Petroleum Reserve stocks highlight reduced emergency supply buffers amid the Iran conflict. In Japan, accelerating services inflation, particularly in transport-related costs, signals persistent price pressures that could complicate the Bank of Japan’s policy outlook.

WHAT HAPPENED OVERNIGHT

US Stocks Rises as Anthropic IPO Filing Lifts AI Stocks Ahead of Fed, Earnings

• US stocks rose on Monday, with the Dow up 0.28% to 52,361.58, the S&P 500 gaining 0.70% to 7,676.77 and the Nasdaq rising 0.83% to 26,169.38. The S&P 500 and Nasdaq rebounded after two consecutive weekly declines.
• Anthropic’s US IPO filing, which disclosed rapid revenue growth alongside steep losses, lifted sentiment towards AI-linked stocks. The Philadelphia semiconductor index gained 2.8%, while technology stocks rose 1.5%.
• More than a third of S&P 500 companies, including Alphabet, Microsoft and Amazon, are due to report earnings this week, putting AI spending and returns in focus. 

US Dollar Rebounds as Investors Brace for Fed Decision, US Economic Data

• The dollar index rose to 101.9 on Monday, snapping a two-week losing streak as investors prepared for the Federal Reserve’s policy decision and key economic releases.
• The Fed is widely expected to hold rates steady this month, with attention on policymakers’ guidance and signals on the possibility of a rate hike in December.
• US GDP growth and the personal consumption expenditures (PCE) inflation index due this week will be watched for clues on the policy outlook. 
• Wall Street gains, supported by optimism over Anthropic’s IPO filing, and falling oil prices also supported the greenback.
• The dollar strengthened most against the euro, pound and yen.

US Treasury Yields Slip Below 5% as Lower Oil Eases Inflation Concerns

• The US 10-year Treasury yield edged below 5% on Monday, extending a three-week decline that had taken it to one-month lows, as investors awaited the Federal Reserve’s policy decision and key economic data.
• US GDP growth and the personal consumption expenditures (PCE) inflation index due this week will be closely watched for clues on the policy outlook.
• Falling oil prices eased inflation concerns as Iran prepared to host senior security and defence officials from Saudi Arabia, Pakistan and Turkey in efforts to revive peace talks.

Oil Slips on Peace Hopes, but Saudi Attacks and Shipping Risks Limit Losses

• Brent crude fell 0.8% to settle at $115.81 a barrel on Monday, while WTI declined 1.46% to $101.76, retreating after Friday’s rally. Both benchmarks remained near six-month highs.
• Hopes of de-escalation weighed on prices as Qatari mediators travelled to Tehran and senior officials from Saudi Arabia, Turkey and Pakistan held talks with Iranian leaders. The four countries agreed to continue discussions on peace and security.
• Supply risks persisted as the Saudi-led coalition said it had destroyed three drones targeting Riyadh and southern Saudi Arabia. 
• October has been the worst month for attacks on commercial shipping in the Strait of Hormuz and nearby waterways.
• An oil spill from a strike-damaged tanker off the UAE coast widened, while a vessel was reported on fire near Al-Faw, Iraq. Saudi Aramco plans to begin storing crude in Singapore in the second half of 2027 to strengthen its regional supply chain.
• US Strategic Petroleum Reserve crude stocks fell to 282.6 million barrels last week, their lowest since October 1982, limiting the scope for supply-side relief.

Day’s Ledger*

Economic Data

• USADP Employment Change Weekly
• US September Durable Goods Orders
• US August S&P/CS HPI Composite
• US October CB Consumer Confidence
• US September New Home Sales

Policy

• ECB President Lagarde Speaks
• RBI Deputy Governor Gupta Speaks

Corporate Actions

• Earnings: ACC Limited, Bajaj Auto, Cipla, JSW Cement, JSW Infrastructure, Larsen & Toubro, Maruti Suzuki India, Mazagon Dock Shipbuilders, Piramal Pharma, Raymond Limited, Steel Authority of India, SBI Life Insurance Company, Tata Capital, Tata Steel, Vedanta Iron and Steel

Tickers to Watch

• TATA CONSUMER PRODUCTS July-September 2026 net profit up 17.6% YoY to 4.67 billion rupees from 3.97 billion rupees. Revenue up 14% to 56.61 billion rupees. EBITDA up 16.5% to 7.83 billion rupees. Margin at 13.84% vs 13.5%. All three beat estimates of 56.05 billion rupees, 4.56 billion rupees and 7.75 billion rupees. Declares a dividend of 2.50 rupees/share.
• REC July-September 2026 net profit down 21.2% YoY to 34.78 billion rupees from 44.15 billion rupees. NII down 9% to 54.78 billion rupees from 60.22 billion rupees. Declares second interim dividend of 3.50 rupees per share (face value 10 rupees).
• DCM SHRIRAM July-September 2026 net profit down 34.09% YoY to 1.05 billion rupees. Revenue up 21% to 41.51 billion rupees. EBITDA down 5.8% to 2.91 billion rupees. Margin falls to 7.02% from 9%. Plans investments across its JV and Kota and Bharuch plants. These include up to 500 million rupees in Shriram Teknor JV, 600 million rupees in Kota filter presses, 1.45 billion rupees in Kota solar plant and 1.2 billion rupees in added electrolysers.
• AAVAS FINANCIERS July-September 2026 net profit up 10.75% YoY to 1.82 billion rupees from 1.64 billion rupees. NII up 10.1% to 4.31 billion rupees from 3.91 billion rupees. Gross NPA at 1.11%. Net NPA at 0.70%.
• AEQUS July-September 2026 net loss widens to 523 million rupees from 210 million rupees. Revenue up 45% YoY to 4.09 billion rupees. EBITDA down 51.7% to 140 million rupees. Margin falls to 3.37% from 10%.

Must Read

• The Rupee in the Age of Digital Dollarisation
• All That Stock Research May Be Answering the Wrong Investment Question
  
• Pricing The Habit
• Beyond Rupee Defence: Building a Resilience Dashboard
  
• Resilience or Belief? Reading the IMF's Outlook Through a Behavioural Lens
  
• India's credit-to-GDP ratio to rise as credit access expands: Economists
  
• SIPs,multibaggers and financial freedom: Lessons from Smart Investor Arena
  
• ASUSE to track hurdles faced by women entrepreneurs, shift to FY cycle
  
• Govt likely to extend duty-free cotton imports through Dec to curb prices
  
• India approves in principle $22 billion in military purchases
  
• India's BPCL expects Russian crude purchases to fall in November

 

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day