Global Mood: Cautiously Risk-on
Drivers: US-Iran peace talks, Oil supply recovery, Fed rate hike bets

Asian equities rose on Wednesday, led by Japan and South Korea, as markets recovered despite elevated global bond yields. Japan’s Nikkei gained 1.4%, while the Topix rose 0.6%; South Korea’s Kospi and Kosdaq advanced more than 1%. Australia’s ASX 200 edged higher. US equity futures also gained modestly after another weak Wall Street session. However, rising bond yields continued to limit risk appetite and kept investors cautious. The SGX Nifty was at 22,809.5, down 20.5 points, pointing to a broadly flat opening for Indian equities.

Sentiment also drew support from renewed diplomatic efforts to end the US-Iran conflict. Qatar is mediating between Washington and Tehran, with Iran linking the reopening of the Strait of Hormuz to an end to hostilities, sanctions relief and the release of frozen funds. The US offered up to 40 million barrels from its Strategic Petroleum Reserve. Meanwhile, softer Fed expectations provided some relief as New York Fed President John Williams signalled no urgency for another rate increase.

THE BIG STORY
Qatar is shuttling messages between Washington and Tehran as both sides seek a way to end the war. Iran’s proposal links a Hormuz reopening to an end to hostilities, sanctions relief and the release of frozen funds. Talks have yet to secure an agreement to reopen the strait, which has disrupted global energy flows and pushed up oil prices. 

The US has also offered up to 40 million barrels from its Strategic Petroleum Reserve to energy firms.

US forces are leaving their remaining bases in Iraq, raising concerns that Iranian-backed militias could gain influence and the Islamic State could regroup. Iraqi security forces will have to take on a larger role without US intelligence and air support.

New York Fed President John Williams said there is no urgency for another rate increase and suggested one more hike late this year may be enough. Traders pared bets on an October move, with December now seen as the more likely timing.

Data Spotlight
US job openings fell 256,000 to 7.08 million in August, below expectations of 7.23 million and the lowest in five months, with declines across healthcare, professional services, manufacturing and construction.

Hiring remained stable at 5.2 million, while quits and layoffs were broadly unchanged, pointing to a gradual cooling in labour demand rather than a sharp deterioration.

US 20-city home prices rose 2.5% y-o-y in July, the strongest increase since May 2025, led by Chicago at 6.9% and New York at 5.8%.

FHFA home prices increased 0.3% m-o-m in July and 2.6% y-o-y, with the Middle Atlantic recording the strongest regional gains.

However, inflation-adjusted home prices fell for a 14th consecutive month, as 3.4% inflation outpaced nominal house-price growth.

Takeaway: The US labour market is showing signs of moderation, while housing remains resilient in nominal terms. The mix points to softer employment demand but continued price pressures in housing, leaving the broader growth and inflation picture mixed.

WHAT HAPPENED OVERNIGHT

US stocks edge lower as yields hit multi-decade highs before Williams' comments ease rate hike bets

• The Dow fell 0.26%, S&P 500 lost 0.17%, and Nasdaq slipped 0.08%, paring deeper losses after NY Fed's Williams said the Fed has time to weigh data before hiking again, pulling October hike odds to 51.5% from 70% earlier.
• The 30-year yield hit 5.62%, its highest since June 2002, and the 10-year reached 5.293%, its highest since June 2007, before retreating on oil price declines and Williams' remarks.
• Consumer confidence plunged to a lowest since 2014 in September; JOLTS showed job openings fell to 7.079 million in August, below the 7.225 million estimates.
• Anthropic's IPO prospectus revealed sharp revenue growth but wider losses, with the company targeting a $2 trillion-plus valuation.
• Meta gained 3.3% despite OpenAI unveiling always-on "dots" agents seen as a Muse competitor.

US Dollar extends gains to three-month highs as Fed tightening bets and Iran stalemate support greenback

• The dollar index rose to 101.4, extending to three-month highs, as little US-Iran progress and still-elevated energy costs kept Fed tightening expectations firmly in place.
• Job openings and consumer confidence both surprised to the downside, while swaps traders are pricing in nearly a full percentage point of Fed hikes over the coming year.
• PCE tomorrow and Friday's payrolls report are the key near-term tests for the dollar's strength, with the greenback up 1.8% in September but little changed for the quarter.

US Treasury yields hold at multi-decade highs as oil-driven inflation and fiscal concerns dominate

• The 10-year yield resumed its climb to 5.28%, holding at 2007 highs, while the 30-year surpassed 5.6% to touch levels last seen during the 2002 dotcom bust.
• Swaps traders are pricing in nearly a full percentage point of Fed hikes over the coming year, as West Asia-driven oil gains fuel global central bank tightening expectations.
• Softer JOLTS and consumer confidence data offered modest downside signals but did little to alter the structural upward pressure from strong growth, large fiscal deficits, and rising government debt.
• Wednesday's PCE report and Friday's payrolls data are the next key inputs for the Fed's policy path.

Oil falls 2.5% as Saudi Arabia resumes Yanbu loadings and West Asia exports recover

• Brent fell 2.6% to $102.59/bbl and WTI dropped 3.5% to $89.38 as markets focused on recovering crude exports from West Asia.
• Saudi Arabia resumed tanker loadings at Yanbu after restarting its East-West pipeline, improving the outlook for regional supply.
• West Asia crude exports rebounded to 16.328 million bpd in September, the highest since the US-Israeli war on Iran began in late February, Kpler data showed.
• Brent remained on track for a monthly gain of about 13%, despite the latest decline, as concerns over prolonged supply disruptions persisted.
• Trump said he had offered Iran nothing to end the war, rejecting reports that Washington was willing to ease sanctions or release frozen funds in return for nuclear concessions.
• US diesel futures rose 2.6% while European prices edged lower as Washington pushed the EU to release emergency diesel inventories and considered broader sales of red-dyed diesel to ease fuel prices.

Day’s Ledger*
Economic Data

• China September Manufacturing PMI
• China September Composite PMI
• India services trade data
• India August fiscal data
• US September ADP Non-farm Employment Change
• US August Core PCE Price Index
• US Apr-Jun GDP Data
• US Crude Oil Inventories
  

Corporate Actions 

• Sakuma Exports to consider fund raising 
• Policy
  
• Eurozone ECB's Elderson Speaks
• Eurozone ECB's Schnabel Speaks
• US FOMC Member Barkin Speaks

Tickers to Watch

• PIDILITE INDUSTRIES arm to transfer its entire stake in Finemake Technologies to the company's founders.
• TUBE INVESTMENTS OF INDIA and arm enter into an agreement to subscribe to preference shares worth 2.5 billion rupees.
• STL NETWORKS emerges as L1 bidder for a 2.5 billion rupees RailTel order to deploy cloud infrastructure at data centres.
• GODAWARI POWER & ISPAT invests 500 million rupees in subsidiary Godawari New Energy.
• TATA STEEL wins FY09 tax case on interest deduction, reducing tax liability by 427 million rupees to 1.259 billion rupees.
• PRESTIGE ESTATES PROJECTS completes two residential developments in Hyderabad.
• JSW CEMENT announces Scheme of Arrangement involving merger of Shiva Cement to create a unified cement platform.
• PUNJAB & SIND BANK board approves raising foreign currency funds via a $1 billion MTN programme.

Must Read

• IRDAI, Insurance Companies and the Hunt for New Bakras
• TRAI Directive Could Expose Telecom’s Pricing Trick
• Regulating for the Public Good
• AI and the Fiscal Blind Spot
• The Pipes: Monetary Policy Transmission 

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day