Global Mood: Cautiously Risk-On
Drivers: Post-election escalation possibility, Vance-Trump policy differences

Most Asian markets were up on Thursday, tracking gains on Wall Street after a sharp decline in oil prices and clarity over US midterm election results. Japan’s Nikkei 225 rose 0.49%, and the Topix gained over 2%, while South Korea’s Kospi fell 2.33%, and the Kosdaq declined 1.24%. Australia’s S&P/ASX 200 advanced 1.39%. US equity futures edged higher, with Dow futures up 0.2% and S&P 500 futures gaining 0.1%. GIFT Nifty traded at 24,316, up 366 points, or 1.53%, pointing to a sharply positive open for Indian equities.

Wall Street rallied on Wednesday as WTI crude fell more than 8% to settle at $88.12 a barrel. The Dow surged over 1,500 points, or 3%, for its best session since April 2025, while the S&P 500 gained 1.6%. Investors also assessed the Democrats’ gains in both chambers of Congress. In after-hours trade.

THE BIG STORY
Democratic victories have weakened Trump's domestic position, increasing pressure to negotiate an exit or risk renewed military escalation. Gulf states want the war to end but oppose any settlement that compromises freedom of navigation through Hormuz or leaves them exposed to Iranian threats.

Vice President JD Vance blamed the war for Republican election losses, calling earlier advice to end the conflict sound. Trump defended the campaign, saying Washington had prevented Iran from obtaining a nuclear weapon. Vance's remarks have raised questions about divisions within the administration and the political future of Defence Secretary Pete Hegseth. Trump has been briefed on options to restart combat operations, with sources saying renewed attacks remain possible after the midterms.

US intelligence assessments suggest further strikes may not change Tehran's negotiating position or lead to regime change. Mediators have intensified efforts to secure a deal, but Iran has shown little willingness to accept US demands on nuclear enrichment.

Tehran views the US election outcome as a rejection of the war, but fears Trump could respond with fresh military action. Iranian leaders have warned against concessions, while regional analysts caution that miscalculation by either side could trigger renewed conflict.

Data Spotlight
US crude inventories fell by 865,000 barrels in the week ended October 30, marking the fifth consecutive weekly draw, after a 1.892-million-barrel fall the previous week.  Distillate inventories fell by a sharper-than-expected 3.565 million barrels, against forecasts for a 100,000-barrel decline, while gasoline stocks decreased by 222,000 barrels. Crude stocks at Cushing rose by 280,000 barrels, refinery crude runs increased by 199,000 barrels per day and net crude imports rose by 1.179 million bpd.

US services sector growth slowed in October, with the ISM Services PMI falling to 54.5, its lowest in three months, from 54.9 in September and below expectations of 54.8. 

US private businesses added 86,000 jobs in October, exceeding expectations of 69,000 and matching September's downwardly revised increase, according to ADP. Mid-sized firms led hiring with 33,000 jobs, followed by small businesses with 28,000 and large companies with 24,000. 

Job creation was concentrated in services, particularly trade, transportation and utilities.  However, professional and business services shed 27,000 jobs for a third consecutive month.

Takeaway: The latest US data point to continued economic resilience, with private-sector hiring exceeding expectations despite slower services activity. The ADP employment increase suggests that labour demand remains positive, although continued job losses in professional and business services indicate uneven conditions. In energy markets, consecutive crude inventory draws and a sharper-than-expected decline in distillate stocks point to tighter product availability, potentially offering support to oil prices. For the Federal Reserve, resilient employment alongside moderating services activity leaves the policy outlook finely balanced.

WHAT HAPPENED OVERNIGHT

US Stocks Rally as Democratic Sweep Eases Political Uncertainty; Data Centre Stocks Tumble

• Dow Jones rose 3% to 53,356.12, the S&P 500 gained 1.6% to 7,688.62, and the Nasdaq Composite advanced 1.4% to 25,736.51 after Democrats won control of both chambers of Congress, easing political uncertainty and boosting risk appetite.
• Investors viewed the prospect of political gridlock as potentially favourable for equities, while a sharp decline in oil prices on hopes of an end to the Iran war further supported sentiment.
• AI heavyweights rallied on expectations that slower infrastructure expansion could ease spending pressures: Microsoft gained 6.7%, Amazon 6.1%, Alphabet 3.2% and Meta 1.4%.
• Data centre operators slumped on concerns that tighter regulation and local opposition could slow AI infrastructure expansion, with Hut 8 falling 23%, IREN 11% and Core Scientific 10%.
• The Philadelphia Semiconductor Index fell 3.1% to a six-month low, despite AMD rising 1% after forecasting stronger-than-expected 2027 growth.

US Dollar Slides to Five-Week Low as Democratic Sweep Eases Fiscal and Rate-Hike Concerns

• The dollar index fell to 101.3, its lowest in five weeks and the biggest daily decline in about a month, as investors assessed the implications of Democrats gaining control of both chambers of Congress.
• A Democratic sweep is expected to increase regulatory scrutiny, particularly in the AI sector, while limiting further tax cuts and government spending, potentially easing concerns over higher federal borrowing.
• Tighter AI regulation could also weigh on economic growth, reducing the need for further monetary tightening by the Federal Reserve.
• Markets priced in a 77% probability of a 25-basis-point Fed rate hike in December, down from 84% a week earlier.
• The Swiss franc and Japanese yen outperformed the dollar, gaining 0.6% and 0.4%, respectively, as investors favoured traditional safe-haven currencies.

US Treasury Yields Fall Below 4.9% as Democratic Sweep Eases Political Uncertainty

• US 10-year Treasury yield fell as much as 10 basis points to below 4.9% after Democrats won control of both chambers of Congress and President Donald Trump accepted the election results, easing political uncertainty.
• The Democratic victory is expected to increase regulatory scrutiny, particularly in the AI sector, while limiting scope for further tax cuts and government spending.
• Prospects of greater political gridlock could constrain Trump's policy agenda, including his approach to tariffs and Iran, thereby reducing uncertainty for bond investors.
• US Treasury expects to maintain nominal coupon and floating rate note auction sizes at current levels over the next several quarters.
• Treasury plans to shift seven-year note issuance from monthly auctions to a quarterly new-issue format with two reopenings, aligning it with the 10-year note issuance schedule.

Oil Plunges More Than 8% as Democratic Election Victory Fuels Hopes of Iran War Exit

• Brent fell 8.7% to settle at $94.62 a barrel, while WTI declined 8.3% to $88.12, with both benchmarks closing at their lowest levels since Aug 31.
• Investors bet that Democrats gaining control of Congress could constrain President Donald Trump's military options and increase pressure on Washington to seek a negotiated end to the US-Israeli war with Iran.
• Trump said the US had no immediate plans to strike Iran, while Vice President JD Vance questioned the decision to enter the war. However, analysts warned that the risks of escalation remained and a peace deal was far from certain.
• Qatar stepped up mediation efforts, while Iran's Supreme Leader Ayatollah Mojtaba Khamenei told US hostility would persist regardless of which party-controlled Washington.
• Gulf exports of crude, condensate and refined products averaged 17.1 million barrels per day in October, down from 18.9 million bpd in September but still around three-quarters of pre-war levels.
• US crude inventories unexpectedly fell by 865,000 barrels to 409.8 million barrels in the week ended Oct 30, against analysts' expectations of an 877,000-barrel increase, limiting some downside pressure on prices.

Day’s Ledger*

Economic Data

• US Initial Jobless Claims
• UK October S&P Global Construction PMI

Policy

• Bank of England Interest Rate Decision
  
• ECB's Schnabel Speaks
• ECB Supervisory Board Member Tuominen Speaks
• US FOMC Member Barkin Speaks
• ECB's Lane Speaks
• German Buba President Nagel Speaks
• ECB President Lagarde Speaks

Corporate Actions

• Earnings: BEML Limited, Bharti Airtel, Bharat Forge, Britannia Industries, CESC Limited, Glenmark Pharmaceuticals, Hindustan Construction Company, Life Insurance Corporation Of India, Mahindra & Mahindra, Oil & Natural Gas Corporation

Tickers to Watch

• TORRENT POWER July-September 2026 net profit up 12.9% YoY to 8.38 billion rupees. Revenue up 24.5% to 98.02 billion rupees from 78.76 billion rupees. EBITDA up 15.5% to 17.39 billion rupees. Margin narrowed to 18% from 19%.
• APOLLO HOSPITALS July-September 2026 net profit up 33.6% YoY to 6.6 billion rupees from 4.94 billion rupees. Revenue up 23% to 76.15 billion rupees. EBITDA up 28.8% to 11.91 billion rupees. Margin at 15.6% vs 14.9%. Beats estimates on all key parameters: profit (6.32 billion rupees), revenue (75.15 billion rupees), EBITDA (11.6 billion rupees) and margin (15.4%).
• BSE July-September 2026 net profit up 44.9% YoY to 8.0915 billion rupees from 5.5843 billion rupees. Revenue up 34.1% to 14.326 billion rupees. EBITDA up 42.4% to 9.84 billion rupees. Margin at 68.7% vs 64.66%.
• SUNDARAM FINANCE July-September 2026 net profit up 5.9% YoY to 5.17 billion rupees from 4.88 billion rupees. NII up 21.1% to 10.16 billion rupees from 8.39 billion rupees. AUM up 19% to 659.92 billion rupees in April-September 2026.
• ADANI POWER Signs 25-year Power Supply Agreement with Uttarakhand Power Corporation to supply 1,234 MW of ex-bus net thermal power. Backed by 1,320 MW installed capacity. Follows winning UPCL's tender.

Must Read

• Sugar prices rise over ₹4/kg despite govt steps, retail rate hits ₹59.50
• India sees some trade relief, new risks after US midterm elections
• India puts food before fuel as El Nino dents ethanol blending target
• India markets regulator reviews startup-listing platform rules
• India cybercrime agency warns financial firms of AI-driven cyberattacks
• Midterm Losses May Push Trump to Seek a Quick India Trade Deal
• RBI’s Forex Curbs Ease Hedging Pressure on Rupee
• Monetary Policy: Communicating the Future
• Resilient Volumes Mask a Growing Consumer Squeeze
• The Test Ahead for Warsh’s Quieter Fed
• Banking Reform: Can Another Committee See Beyond Regulatory Silos?

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day