Investors Turn Defensive on US Shutdown, Europe’s Political Volatility

GLOBAL MOOD: Risk-off
Drivers: US Government Shutdown, Political gridlock in France

Investors are treading cautiously amid heightened political uncertainty in the US and France. Investor sentiment is dampened by the risk of a prolonged US government shutdown, which could delay key economic data and disrupt fiscal operations, while political instability in France adds to concerns over European economic governance. Safe-haven assets, including gold and government bonds, have seen modest demand, reflecting a risk-off tone globally.

TODAY’S WATCHLIST
 - ECB President Lagarde Speech
 - Fed Kashkari Speech 

THE BIG STORY
The White House on Monday clarified that President Donald Trump's earlier claim that federal employees were already being laid off due to the ongoing government shutdown was premature but cautioned that job losses could occur if the standoff continues into a seventh day. The Republican-led Senate rejected both a Republican proposal to fund operations through November 21 and a Democratic plan that would also extend healthcare subsidies under the Affordable Care Act, leaving negotiations deadlocked. While Trump indicated he was open to a deal on the expiring subsidies covering roughly 24 million Americans, Senate Democrats remained firm, and talks with the president and top Senate Democrat Chuck Schumer showed little progress. The Republican-controlled House remained out of session, with Speaker Mike Johnson stating no plans to reconvene until funding is restored.

Meanwhile, across the Atlantic, French President Emmanuel Macron faced a deepening political crisis after outgoing Prime Minister Sebastien Lecornu resigned just hours after announcing his cabinet, marking the shortest-lived administration in modern French history. Macron tasked Lecornu with holding last-ditch talks with other parties over the next 48 hours to seek a path to political stability, though details of the mandate remain unclear. The dual crises in the US and France underscore ongoing political gridlock and uncertainty, raising concerns over economic and governance risks in both countries.

Data Spotlight 
Japanese household spending rose faster than expected in August, supported by higher travel and transportation expenditure. Consumer spending increased 2.3% year-on-year, marking the fourth consecutive month of gains and surpassing the market median forecast of 1.2%. On a seasonally adjusted monthly basis, spending rose 0.6%, ahead of the anticipated 0.1% rise.

Meanwhile, Australia’s Westpac-Melbourne Institute Consumer Sentiment Index fell 3.5% month-on-month in October 2025 to 92.1, the steepest drop since April, erasing gains seen between May and August. Family finances weakened, with one-year expectations down 4.8% to 82.1 and 12-month outlook falling 9.9% to 97.1, the lowest in over a year. Broader economic assessments were mixed, with the 12-month outlook slipping 2.5% to 89.9, while the five-year outlook rose 1.4% to 94.0.

Takeaway:
Japanese consumer spending remains resilient, while Australian households are growing more pessimistic about their finances and near-term economic prospects, reflecting regional contrasts in sentiment and consumption trends.

WHAT HAPPENED OVERNIGHT

• Nasdaq and S&P 500 hit record highs on AI deals
  • Nasdaq and S&P 500 reached record closing highs on Monday; Dow edged lower.
  • AMD surged 23.7% after announcing a major AI chip supply deal with OpenAI.
  • Tesla rose 5.5% ahead of a teasing event on social media platform X.
  • Starbucks fell 5.0% after TD Cowen cut its price target, citing weakening labour market for Generation Z.

• US Treasury yields rise amid government shutdowns
  • 10-year US Treasury yield rose 4.7 basis points to 4.166%, the highest in over a week.
  • Rising borrowing costs in Europe and Japan supported the move higher.
  • Investors remain cautious as the US federal government shutdown delays key economic data.
  • President Trump’s threat to fire federal workers adds to market uncertainty.

• US Dollar gains on political turmoil in France & Japan, Federal shutdown
  • The US dollar index rose to 98, nearing August highs amid global political uncertainty.
  • Euro weakened 0.26% to $1.171 after the resignation of French Prime Minister Sebastien Lecornu.
  • Japanese yen depreciated sharply following Sanae Takaichi’s election as ruling party leader.
  • Ongoing US federal government shutdown extended to its sixth day, adding to market caution.

• Crude oil prices rise on modest OPEC+ supply hike
  • Brent crude oil prices gained after OPEC+ signalled a smaller-than-expected production increase for November.
  • Brent crude settled up 1.46% at $65.47 a barrel.
  • US West Texas Intermediate rose 1.33% to $61.69 a barrel.
  • A soft demand outlook likely capped further near-term gains. 

 Day’s Ledger

Economic Data

• Canada Aug Balance of Trade
• US Aug Balance of Trade
• US Sep Consumer Inflation Expectations

Corporate Actions

• Jul-Sep Earnings: AJR Infra and Tolling, Deep Diamond, Dev Accelerator, Harmony Capital
• Allcargo Terminals to consider right issue
• Julien Agro Infratech to consider bonus shares
• Swojas Foods to consider fund raising

Policy Events

• Fed Bostic Speech
• Fed Bowman Speech 
• Fed Miran Speech 
• Fed Kashkari Speech 
• ECB President Lagarde Speech
  
  
  

Tickers to Watch

• ASTER DM HEALTHCARE receives NSE, BSE nod for merger with Quality Care India.
• BRIGADE ENTERPRISES signs pact to develop residential project in West Chennai.
• COAL INDIA signs MoU with Chhattisgarh government firm to explore critical minerals.
• DEEPAK NITRITE inaugurates Deepak R&D Centre 2.0 in Vadodara.
• HAVELLS INDIA board approves subsidiary’s acquisition of 20% stake in Havells HVAC.
• HCL TECH partners with MIT Media Lab in the US for next-generation AI research.
• ITC HOTELS signs definitive agreement for a 140-key luxury hotel in Patna.
• Ltimindtree inks multi-year deal with global media firm, its largest to date.
• M&M launches new top-end variants in Bolero and Bolero Neo range with added features
• SEBI fines BRIGHTCOM GROUP director ₹3.0 million for role in accounting fraud.
• VEDANTA reports mixed Q2 metals output as aluminium production growth slows.
• ZYDUS LIFESCIENCES gets Health Canada approval for generic liothyronine tablets.

Must Read

• Adani Group to invest ₹300 billion more in Navi Mumbai airport expansion
• NHRC issues notices to states over children's deaths linked to cough syrup
• India's first private sector nuclear tender plagued by cost, funding issues
• Private sector banks see dip in market cap in Jul-Sep: S&P Global
• Bank gross NPAs to stay controlled at 2.3-2.5% by March 2026: CRISIL
• RBI's Basel III norms to lower banks' capital requirement from 2027
• Takaichi Adviser Says October Too Early for BOJ Rate Hike
• Trump’s Contradiction: Demanding Steep Rate Cuts for a ‘Booming’ Economy
• Eli Lilly to invest over $1 billion in India to expand manufacturing capacity
  
  

See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

Provisioning for Appearances: RBI’s Half-Hearted Tryst with ECL 

India adopted ECL to align with global norms — but without the data, governance, or institutional discipline that make it work.
NBFCs live in a dual-rule world, banks remain exempt, and auditors seldom challenge assumptions.

The result? Global standards on paper, domestic reality in practice.

GURUMURTHY R writes , until governance, audit rigour, and supervisory trust catch up, India’s provisioning reform will remain more appearance than substance.