Global Mood: Cautiously risk- off
Drivers: Persistent US core inflation, Iranian threats against US officials

Asian markets were mixed on Wednesday after Wall Street declined on higher-than-expected US inflation reading, which strengthened expectations of a Federal Reserve rate hike in December. Japan’s Nikkei 225 fell 0.22%, while the Topix gained 0.52%. South Korea’s Kospi slipped 0.48%, and Australia’s S&P/ASX 200 edged up 0.04%.

US consumer inflation rose 0.4% month on month in October, above the 0.3% estimate, while core inflation increased 0.3%, against expectations of 0.2%. The data pushed the probability of a 25-basis-point Fed rate hike in December to around 90%. On Wall Street, the Dow fell 0.30%, the S&P 500 declined 0.38% and the Nasdaq lost 0.74%. Nvidia slid 5.5%, extending its losses for a second session amid reports surrounding CEO Jensen Huang. The GIFT Nifty was trading at 25,327, down 1.5 points or 0.01%, pointing to a flat opening for Indian equities.

THE BIG STORY
US Treasury Secretary Scott Bessent has moved from his home to a military base following threats to his life from Iran, The New York Times reported, citing sources familiar with the matter. Bessent has been a key figure in Washington's economic pressure campaign against Tehran during the US-Israeli war. The severity of the threats remains unclear, and US officials have said Iran's ability to carry out large-scale attacks overseas is limited. Iran has previously denied plotting attacks against US officials and citizens.

Russian and Ukrainian officials began their first peace talks since February in Abu Dhabi, with US envoys Steve Witkoff and Jared Kushner leading efforts to broker an agreement. Ukrainian President Volodymyr Zelenskiy described the discussions as constructive, highlighting prisoner releases and long-term security guarantees. US Secretary of State Marco Rubio also called the meeting productive. European governments are seeking a greater role in negotiations, while fighting and attacks on energy infrastructure continue.

US consumer prices rose 0.4% month on month in October, while core CPI increased 0.3% for a third consecutive month, exceeding economists' expectations.

Fed Governor Christopher Waller said a 50-basis-point increase in December should be considered if core inflation reached 0.3% or higher. Dallas Fed President Lorie Logan also said the central bank could raise rates more rapidly. Traders increased bets on a half-point December hike, with the implied probability briefly reaching 15%, while expectations also shifted towards three quarter-point increases by mid-2027.

Data Spotlight
US consumer inflation moderated in October, with the Consumer Price Index (CPI) rising 0.4% month-on-month, down from 0.6% in September but above expectations of 0.3%. Core CPI increased 0.3%, unchanged from the previous two months and above forecasts of 0.2%. 

Shelter costs rose 0.3%, accounting for more than 30% of the overall increase, while food prices advanced 0.5% and energy prices rose 0.7%, slowing sharply from September's 5.2% increase.

The US Bureau of Labour Statistics did not publish annual headline or core CPI inflation rates for October because comparable data for October 2025 were unavailable following the federal government shutdown. 

Before the release, analysts had expected headline inflation to accelerate to 3.9% from 3.7% and core inflation to rise to 2.8% from 2.6% in September. The monthly figures, however, showed inflation easing less than expected.

The US NFIB Small Business Optimism Index edged down to 97.8 in October from 97.9 in September, reaching its lowest level since June and slightly exceeding forecasts of 97.7. Labour quality and availability remained the biggest concern for small businesses, cited by 25% of owners.  Taxes emerged as the second-largest concern, with 21% identifying them as their most important problem, the highest proportion since May 2021. However, expectations for better business conditions over the next six months improved by two points to a net 8%.

Takeaway: The October CPI report offers limited relief on inflation, as headline and core monthly readings both exceeded expectations despite moderating from September. The absence of annual inflation figures also makes it harder to assess the broader price trajectory. Persistent shelter and food price pressures suggest underlying inflation remains sticky, potentially reinforcing the Federal Reserve's cautious approach to rate cuts. Meanwhile, weakening small-business sentiment and continued concerns over labour availability and taxes point to pressure on smaller firms, although improving expectations for future business conditions offer a modest positive signal.

WHAT HAPPENED OVERNIGHT

US Stocks Fall as Hot US Inflation Data and Hawkish Fed Comments Fuel Rate-Hike Concerns

• The Dow fell 0.30% to 52,231.89, the S&P 500 declined 0.38% to 7,520.93 and the Nasdaq dropped 0.74% to 25,065.87, as stronger-than-expected inflation data reinforced expectations of further Fed tightening.
• Technology stocks led losses, with the S&P 500 technology sector falling 1.4%. Nvidia dropped 5.4%, extending its two-session decline to 9.6%, while the Philadelphia Semiconductor Index slipped 0.4%.
• Investors also monitored Anthropic's proposed IPO, which could raise as much as $64.4 billion at a fully diluted valuation of up to $1.4 trillion, potentially triggering portfolio repositioning across AI-related stocks.

US Dollar Extends Gains to 102.3 as Hot Inflation and Hawkish Fed Comments Fuel Rate Bets

• The US dollar index rose to 102.3 on Tuesday as stronger-than-expected inflation data and hawkish comments from Federal Reserve officials reinforced expectations of further monetary tightening.
• Fed Governor Christopher Waller warned that a 50-basis-point rate hike in December may be necessary if inflation remains elevated. Dallas Fed President Lorie Logan backed at least two additional 25-basis-point increases, potentially at a faster pace.
• Markets assigned an approximately 88% probability to a 25-basis-point hike at the Fed's next meeting, with further increases in January and potentially April also being priced in.

US 10-Year Treasury Yield Crosses 5% as Hot Inflation and Hawkish Fed Remarks Fuel Rate Bets

• The 10-year US Treasury yield rose above 5%, extending its rebound from a near-two-month low of 4.84% on November 5.
• Stronger-than-expected October headline and core CPI readings reinforced expectations of multiple additional Fed rate hikes, as higher energy costs appeared to be feeding into core inflation.
• Fed Governor Christopher Waller said he would support a 50-basis-point hike in December if inflation continued to accelerate.
• Dallas Fed President Lorie Logan backed at least two further 25-basis-point increases.
• Treasury yields across maturities have risen this week as risk appetite recovered following a brief flight to safety after the Democratic Party gained control of Congress.
• Investors have also reassessed the outlook for technology stocks, which have been a major driver of US investment and economic growth.

Oil Falls to $91.49, Hits Two-Month Low as US Plays Down Further Iran Strikes

• Brent crude fell $1.08, or 1.2%, to settle at $91.49 a barrel, while WTI declined 81 cents, or 0.9%, to $86.04.
• Both benchmarks posted their second consecutive lowest closes since August 31 and remained in technically oversold territory.
• Prices recovered some early losses after Iran denied that talks with Washington were under way, tempering expectations of a near-term diplomatic breakthrough.
• US Secretary of State Marco Rubio said sanctions and a naval blockade were working, reducing the need for major military operations against Iran. President Donald Trump has also indicated he would hold off on further strikes.
• Continued attacks involving Yemen's Houthis and Saudi Arabia highlighted persistent regional risks, although markets focused on Washington's more conciliatory tone.
• The US Energy Information Administration projected global petroleum consumption to fall to 102.4 million barrels per day in 2026 from a record 104.4 million bpd in 2025, adding to concerns over demand.
• Expectations of further Fed rate hikes following stronger-than-expected US inflation data also weighed on the demand outlook, as higher borrowing costs could slow economic activity and oil consumption.
• Potential progress in Russia-Ukraine peace talks could add further supply pressure if sanctions are eased and Russian exports increase.

Day’s Ledger*

Economic Data

• Germany October CPI
• OPEC Monthly Report

Policy

• German Buba President Nagel Speaks
• ECB President Lagarde Speaks

Corporate Actions

• Earnings: Hindustan Copper, National Fertilisers, Tata Power Company,

Tickers to Watch

• COCHIN SHIPYARD July-September 2026 net profit down 50% YoY to 538 million rupees. Revenue up 11.7% to 12.49 billion rupees. EBITDA down 30.8% to 509.5 million rupees. Margin at 4.1% vs 6.6%. Interim dividend of 3 rupees/share.
• MRF July-September 2026 standalone net profit down 27.8% YoY to 3.69 billion rupees. Revenue up 17.6% to 85.24 billion rupees. EBITDA down 16.3% to 9.13 billion rupees. Margin at 10.7% vs 15%. Interim dividend of 3 rupees/share. Raw material and logistics costs to stay elevated.
• WHIRLPOOL OF INDIA July-September 2026 revenue up 13.7% YoY to 18.73 billion rupees. Net profit down 39% to 250 million rupees. EBITDA down 32.1% to 395 million rupees. Margin at 2.1% vs 3.5%. Raised prices by nearly 5% from November 1.
• OLECTRA GREENTECH July-September 2026 revenue up 4.6% YoY to 6.87 billion rupees. Net profit up 6% to 530 million rupees. EBITDA up 2.2% to 920 million rupees. Margin at 13.4% vs 13.7%.
• IIFL FINANCE approves a 64.14 billion rupee preferential fundraise led by Blackstone at 602 rupees/share, a 4% discount to CMP. Blackstone-affiliated Ingot SG to infuse 50 billion rupees. Anchorage to put in 1.5 billion rupees. Promoters to infuse 12.64 billion rupees via warrants. Blackstone to hold a 15.57% fully diluted stake.
• BAJAJ FINANCE to issue warrants worth 58 billion rupees to promoter Bajaj Finserv. The issue is 5.74 crore warrants at 1,010 rupees each, a 5% discount to CMP.
• TATA MOTORS CV raises stake in Iveco Group to 96.25%. Will begin Dutch squeeze-out of remaining shares. Borsa Italiana to suspend trading in Iveco shares.
• BHEL Telangana tax body drops 2.07 billion rupee demand.
• BANK OF BARODA raises MCLR across tenures. One-month at 8% from 7.95%. Three-month at 8.50% from 8.30%. Six-month at 8.70% from 8.50%. One-year at 8.85% from 8.75%.
• STAR HEALTH IRDAI approves HDFC Mutual Fund schemes to buy up to 9.99% stake.

Must Read

• AI, Oil and Why Dalal Street Has Little Reason to Relax
  
• A Seat at the RBI’s Table Must Not Become a Market Advantage
  
• Your IPO Money May Never Reach the Company
  
• Why the RBI Cannot Leave the Rupee to Market Forces
• Trump’s Defeat Leaves Markets Exposed to Another Oil Shock
• Beyond the Blue Wave: India's Long Game with America
• Urban youth unemployment hits six-quarter high in Q2; Kerala tops states
• PHDCCI seeks 180-day NPA window for MSMEs, higher MUDRA loan limits
• Multiple apps, fragmented records complicate gig workers' social security
• US midterm results may ease India's oil import bill, but tariff risks stay
• Blackstone to buy about 16% of IIFL Finance in latest foreign bet on Indian lenders

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day