26 October 2026: TMGM Morning Market Briefing

Morning Market Briefing

• 51.8% of the runoff vote secured a fourth term for Brazilian President Luiz Inácio Lula da Silva. A Tokyo-listed Brazilian equities ETF dropped around 15%, Deutsche Bank reported.
• A 10% probability of an October rate increase was reflected in federal funds futures. September’s 25-basis-point increase had brought the target range to 3.75–4.00%.
• A 75% chance of a December increase to 1.50% was priced into Japanese interest-rate swaps, according to Brown Brothers Harriman. The Bank of Japan’s current policy rate was 1.25%.
• An 85% chance of a rate increase this week was priced into Canadian swaps after headline inflation reached 3.1% in September, Brown Brothers Harriman reported.
• WTI crude pulled back from a five-month peak of $103.28 towards $100 after President Donald Trump ruled out an immediate attack on Iran.
• A U.S. Treasury proposal to extend restrictions on U.S. investment in China, including biotechnology, drew opposition from China, according to Bloomberg.
• Following Saudi Arabia’s announcement that flights had resumed, Yemen’s Houthis said attacks on Riyadh’s King Khalid Airport would continue, Reuters reported.
• European trading saw Dow Jones futures advance 0.32% and S&P 500 futures rise 0.14%. Nasdaq 100 futures, by contrast, slipped 0.13%.
• Early Asian trading took gold below $4,000 to around $3,995, keeping it close to its lowest level since July.

Key Market Moves

U.S. Equity Futures Diverge

A 0.32% rise took Dow Jones futures to around 52,560 during Monday’s European session. S&P 500 futures advanced 0.14% to approximately 7,670, whereas Nasdaq 100 futures eased 0.13% to around 29,080.

Gold Trades Near July Low

Around $3,995 was gold’s level in early Asian trading on Monday. The metal fell through $4,000 and stayed close to its lowest level since July. High energy prices and inflation worries provided the backdrop as the Federal Reserve’s policy meeting approached.

Brazil’s Election Outcome

Fourth Term for Lula; Brazilian Equity ETF Drops Sharply

A 51.8% to 48.2% runoff victory over Flávio Bolsonaro gave Brazilian President Luiz Inácio Lula da Silva a fourth term, overturning his first-round deficit. Three weeks before the runoff, Lula had received 45.1% of the vote versus Bolsonaro’s 47.0%. According to Deutsche Bank, this was the first time a first-round runner-up had won since Brazil restored direct presidential elections in 1989.

Asian trading brought a fall of around 15% in a Tokyo-listed ETF tracking Brazilian equities, Deutsche Bank reported. Derivatives also pointed to a decline of around 10% in the real, the bank said. That signal did not represent a confirmed spot-market move.

A more conservative Congress now confronts Lula. Deutsche Bank said right- and centre-right parties raised their Senate share from 47% to 63% in the first round. Although Lula has pledged a fiscal adjustment, he has not set out how he would achieve it. Deutsche Bank and Société Générale both viewed the composition of Congress as a limit on his legislative agenda and fiscal expansion.

An extension of voting hours forms the basis of Bolsonaro’s challenge to the result, according to Société Générale. The bank also flagged outstanding debt concerns and the challenge of achieving fiscal consolidation with the new balance in Congress.

Monetary Policy & Economic Data

10% October Hike Probability in Fed Futures After September Increase

A 10% chance of an increase at this week’s Federal Reserve meeting was implied by federal funds futures, according to Brown Brothers Harriman’s Elias Haddad. An increase at the December 9 meeting was almost fully priced in. September’s 25-basis-point increase left the current target range at 3.75–4.00%.

Calls for patience by several key Fed officials underpin Haddad’s forecast that rates will remain unchanged this week. He also highlighted October’s composite purchasing managers’ index, which indicated robust private-sector growth and a steep rise in selling prices. Monday’s Asian session saw the U.S. Dollar Index weaken.

75% December Hike Probability Priced Into Japan Swaps

A 75% probability of a 25-basis-point Bank of Japan increase to 1.50% at the December 18 meeting was reflected in Japanese interest-rate swaps, Brown Brothers Harriman reported. Pricing also indicated nearly 75 basis points of tightening over the next 12 months.

While the BoJ assesses September’s 25-basis-point increase, Brown Brothers Harriman’s Elias Haddad expects it to hold its policy rate at 1.25% at the upcoming meeting. In September, Governor Kazuo Ueda cautioned that swift rate increases could destabilise asset prices. Establishing that 2% inflation had become entrenched could take time, he said.

An early rise in USD/JPY at the start of Monday’s session gave way to a decline. The yen consequently remained close to a one-month high against the dollar.

85% Hike Probability in Canada Swaps as Inflation Tops Projection

An 85% chance of a Bank of Canada increase this week was priced into Canadian interest-rate swaps, Brown Brothers Harriman reported. Strategist Elias Haddad forecasts a 25-basis-point increase to 2.50%. The policy rate has been unchanged since December 2025.

A recent warning from Governor Tiff Macklem stated that “the risk that inflation broadens and becomes more persistent has gone up.” At 3.1% year on year, September headline consumer inflation exceeded the bank’s third-quarter projection of 2.5%. Real GDP expanded at an annualised 3.3% in the second quarter, against the bank’s 2.5% projection.

At 1.85% year on year in September, the average of CPI trim and median was marginally below the central bank’s third-quarter projection of 2.0%. Firms’ one- and two-year inflation expectations had also risen, Brown Brothers Harriman noted.

Energy Markets, Trade Restrictions & Geopolitical Risks

$100 in View for WTI as Trump Rules Out Immediate Iran Strike

A five-month high of $103.28 gave way to a retreat towards $100 for NYMEX WTI crude futures on Monday. Earlier in the Asian session, oil traded around $101.10 after rising more than 4% in the preceding session.

On Sunday, U.S. President Donald Trump dismissed immediate military action against Iran, saying “there will not be a strike today,” according to Al Jazeera. Oil’s pullback also preceded monetary-policy announcements from several major central banks.

Broader U.S. Investment Curbs Face China’s Opposition

A proposal by the U.S. Treasury to widen and tighten restrictions on U.S. investment in China, including biotechnology, met with Chinese objections. Bloomberg reported that a Chinese official said Beijing “firmly opposes” the proposal.

Calling the proposed curbs discriminatory, the official described them as “a typical example of an overly broad application of national security concerns.” They were still proposed measures, not an announced final rule.

Riyadh Airport Flight Resumption Draws New Houthi Threat

Further attacks on Saudi Arabia’s King Khalid Airport in Riyadh were threatened by Yemen’s Houthis on Sunday, Reuters reported. Their statement followed, by several hours, the kingdom’s announcement that flights had restarted despite repeated Houthi attacks.

Key Events Ahead

• Federal Reserve Rate Announcement — Wednesday, 28 October 2026 (United States): The FOMC’s monetary-policy decision is due to be announced.
• Bank of Japan Rate Announcement and Outlook Report — Japan: This week brings the BoJ’s monetary-policy announcement and Outlook Report.
• Bank of Canada Rate Announcement — Canada: The BoC is due to announce its monetary-policy decision this week.
• September PCE and Third-Quarter GDP Releases — Thursday, 29 October 2026 (United States): The release schedule includes September PCE inflation and third-quarter real GDP. Forecasts cited by Brown Brothers Harriman put headline PCE at 0.5% month on month and 3.6% year on year, compared with 0.3% and 3.4% in August. Core PCE forecasts were 0.3% and 3.1%, against 0.2% and 3.0%, while annualised GDP growth was forecast at 3.2%, compared with 2.2% in the second quarter. Estimates from the Atlanta Fed’s GDPNow and New York Fed GDP Nowcast were 3.5% and 2.7%, respectively.
• U.S.–Ukraine–Russia Trilateral Talks Announced — United States / Ukraine / Russia: A trilateral meeting involving Kyiv, Washington and Moscow would be held in November, Ukrainian President Volodymyr Zelenskyy said, according to a Reuters report on Sunday.