Fed Cuts Rates; Market await Trump–Xi Summit Outcome

GLOBAL MOOD: Cautiously Risk-on
Drivers: US-China Trade Talks, Federal Reserve Policy Shift

Global sentiment turned cautiously optimistic on Thursday as investors digested the Federal Reserve’s rate cut and balance sheet adjustment, while awaiting the high-stakes Trump–Xi meeting in Busan. Risk appetite improved modestly following the Fed’s action, though Chair Powell’s cautious tone and a lack of clarity on further easing limited enthusiasm. Markets across Asia opened mixed buoyed by tech and energy gains but restrained by uncertainty over the trajectory of US–China relations.

TODAY’S WATCHLIST
 -- US, Eurozone GDP data,
 -- ECB Interest Rate Decision, BoJ Interest Rate Decision

THE BIG STORY
As US President Donald Trump and Chinese President Xi Jinping prepare to meet in Busan on Thursday during the APEC summit, Washington is pushing for a return to a fragile trade truce amid persistent tensions. Trump struck an optimistic tone ahead of the talks with their first face-to-face meeting since his first term, though key disputes over tariffs and technology remain unresolved.

Meanwhile, the Federal Reserve delivered a widely expected 25 basis points rate cut, lowering the federal funds rate to 3.75%-4.00% and announcing an end to its balance sheet runoff from December 1. The move aims to ease tightening liquidity in money markets and stabilise reserves. However, the decision exposed deep divisions within the Fed with Governor Stephen Miran advocating a deeper cut and Kansas City Fed President Jeffrey Schmid opposing any reduction. Chair Jerome Powell cautioned that further policy moves may be limited amid data gaps caused by the prolonged US government shutdown.

Data Spotlight 
US pending home sales were unchanged in September, signalling that labour market concerns and broader economic uncertainty outweighed the benefits of lower borrowing costs. The flat reading followed a 4.2% rise in August, with regional variations declines in the Midwest (-3.4%) and West (-0.2%) offset by gains in the South (+1.1%) and Northeast (+3.1%). Meanwhile, the average 30-year fixed mortgage rate fell for a fourth consecutive week to 6.3%, the lowest since September 2024.

Takeaway:
Falling mortgage rates have yet to revive housing demand meaningfully, suggesting buyers remain cautious amid economic uncertainty and muted job growth.

WHAT HAPPENED OVERNIGHT

• US Stocks ends mixed as Fed signals caution on future easing
  • US stocks ended mixed on Wednesday after the Federal Reserve delivered a widely expected 25 basis points rates cut but Chair Jerome Powell tempered expectations for another cut in December.
  • The S&P 500 rose 0.2% and the Nasdaq gained 1%, both setting new record highs, while the Dow slipped about 30 points from its record peak.
  • Nvidia jumped 3.6% and briefly surpassed a $5 trillion valuation amid reports Trump may permit chip exports to China, while Broadcom, AMD, and Micron rose over 2%.

• US Treasury yields climb as Powell tempers expectations of further rate cuts
  • The 10-year US Treasury yield rose 10 bps to 4.07% after Fed Chair Jerome Powell signalled caution on additional rate cuts this year.
  • The Fed cut rates as expected and announced an end to quantitative tightening starting December.
  • Yields across the curve moved higher as Powell’s comments suggested the central bank may be less inclined to ease aggressively despite cooling labour market conditions.
  • The Fed also said it will reinvest maturing MBS holdings into Treasury bills to stabilise funding markets.

• US Dollar climbs as Fed signals cautious stance on future rate cuts
  • The dollar index rose above 99.3 on Wednesday, its highest in two weeks, after the Fed cut rates but Chair Powell downplayed the likelihood of another cut in December.
  • The policy vote showed division, with Governor Miran favoured a 50-basis point cut, while Kansas City Fed President Schmid preferred no change.
  • Traders also awaited the upcoming Trump–Xi meeting, which could deliver a framework to pause US tariffs and China’s rare earth export curbs.

• Crude oil prices edge higher on inventory draw and trade optimism
  • Brent crude prices rose as US inventory data showed a larger-than-expected drawdown in crude and fuel stocks, signalling stronger demand.
  • Positive remarks from President Trump ahead of his meeting with Chinese President Xi Jinping also supported sentiment by easing global growth concerns.
  • Brent crude settled up 0.8% at $64.92 per barrel, while WTI crude gained 0.6% to close at $60.48 per barrel.

Economic Data

• Euro Q3 GDP Data
• Euro Sep Unemployment Rate
• India M3 Money Supply 
• US Initial Jobless Claims
• US Q3 GDP Data

Corporate Actions

• Jul-Sep Earnings: Adani Power, Aditya Birla Capital, Bandhan Bank, Canara Bank, Cipla, DLF, Dabur India, Exide Industries, Hyundai Motor, ITC, Lodha Developers, Motilal Oswal, MphasiS, NTPC, Pidilite Industries, Swiggy, Union Bank, United Spirits
• Lancor Holdings to consider fund raising

Policy Events

• ECB Interest Rate Decision
• BoJ Interest Rate Decision
• Fed Bowman Speech
  
  
  

TICKERS TO WATCH

• L&T Q2FY26 results: Net profit jumps 16% to ₹39.26 billion, revenup up 10%
• VARUN BEVERAGES forays into alco-bev sector with Carlsberg tie-up in Africa
• RADICO KHAITAN Q3FY26: Profit up 73%, sales rise 29% on white spirits
• IXIGO posts ₹34 million loss in Q2 FY26 despite 37% revenue growth
• BRIGADE GROUP Q2FY26 results: Net profit rises 48%, revenue up 26%
• BHEL Q2FY26 results: profit triples to ₹3.75 billion; revenue rises to ₹76.86 billion
• M&M to partner with Samsung to launch digital keys for electric SUVs
• DCM SHRIRAM Q2 profit more than doubles to ₹1.59 billion, revenue at ₹11.08 billion
• JSW STEEL laying groundwork for low-carbon exports, says CEO Jayant Acharya
• SAIL Reports Q2 results: Revenue up 3%, net profit down 44%
• NTPC GREEN Q2 net profit up over 2-fold to ₹88 crore; revenue surges 22%
• COAL INDIA Q2 results: Net profit dips 31%, revenue falls to ₹301.87 billion
• CAPRI GLOBAL robust Q2 growth with met profit surging 143% YoY

 

MUST READ

• Indian economy performing better than feared two months ago: CEA Nageswaran
• Cognizant raises FY guidance to 6-6.3% on AI-led client spending
• Domestic liquidity powering IPO and equity boom, say bankers
• Goyal calls for resilient supply chains, less reliance on foreign tech
• Centre brings draft rules to debar drug-makers who provide fake information
• India's growth must align with job creation needs, says Sonal Varma
• India needs bigger, more global-scale banks for 2047 goal: Banking leaders
• Regulatory reform, capital depth draw global banks to India, say CEOs
• Nvidia storms past $5 trillion valuation as AI boom powers meteoric rise
• Sebi's cost-cut proposal seen squeezing mutual fund, broker margins
• Pending-Home Sales Hold at Second-Strongest Pace This Year
• Spain’s Economic Outperformance Slows

 

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day.

Building New Financial Institutions for Sustained Growth

kembai Srinivasa Rao writes, India’s financial system has come a long way—digitally empowered, wider in reach, and more inclusive than ever. Yet, compared to global peers, the gap in banking density and credit penetration remains striking. With only 140 banks serving 1.4 billion people, India’s next growth leap will depend on building new institutions, expanding NBFC capacity, and fostering healthy competition, not just merging existing players.