TMGM Daily Market Breakfast: 26 October 2026

Morning Snapshot

• Brazilian President Luiz Inácio Lula da Silva won a fourth term with 51.8% of the runoff vote, while a Tokyo-listed Brazilian equities ETF fell around 15%, Deutsche Bank said.
• Federal funds futures priced just a 10% chance of an October rate increase, with the target range at 3.75–4.00% following September’s 25-basis-point increase.
• Japanese interest-rate swaps priced a 75% probability of a December increase to 1.50%, while the Bank of Japan’s current policy rate stood at 1.25%, according to Brown Brothers Harriman.
• Canadian swaps priced an 85% probability of a rate increase this week after September headline inflation reached 3.1%, according to Brown Brothers Harriman.
• WTI crude retreated toward $100 from a five-month high of $103.28 after President Donald Trump ruled out an immediate strike on Iran.
• China opposed a U.S. Treasury proposal to broaden restrictions on U.S. investment in China, including biotechnology, Bloomberg reported.
• Yemen’s Houthis said they would continue attacking Riyadh’s King Khalid Airport after Saudi Arabia announced that flights had resumed, Reuters reported.
• Dow Jones futures rose 0.32% and S&P 500 futures gained 0.14%, while Nasdaq 100 futures declined 0.13% during European trading.
• Gold fell below $4,000 to around $3,995 in early Asian trading, remaining near its lowest level since July.

Market Developments

U.S. Equity Futures

During European trading on Monday, Dow Jones futures rose 0.32% to around 52,560 and S&P 500 futures gained 0.14% to approximately 7,670. Nasdaq 100 futures declined 0.13% to around 29,080.

Gold

Gold declined to around $3,995 in early Asian trading on Monday, slipping below $4,000 and remaining near its lowest level since July. Elevated energy prices and inflation concerns formed the backdrop ahead of the Federal Reserve’s policy meeting.

Brazilian Election

Lula Wins Fourth Term as Brazilian Equity ETF Falls Sharply

Brazilian President Luiz Inácio Lula da Silva defeated Flávio Bolsonaro by 51.8% to 48.2% in the presidential runoff, reversing a first-round deficit. Three weeks earlier, Lula had taken 45.1% against Bolsonaro’s 47.0%. Deutsche Bank described the result as the first victory by a first-round runner-up since Brazil returned to direct presidential elections in 1989.

A Tokyo-listed ETF tracking Brazilian equities fell around 15% in Asian trading, according to Deutsche Bank. The bank also reported derivatives indicating a decline of around 10% in the real; that indication was not a confirmed spot-market move.

The election left Lula facing a more conservative Congress. Right- and centre-right parties increased their share of the Senate from 47% to 63% in the first round, Deutsche Bank said. Lula has promised a fiscal adjustment without specifying how it would be delivered. Both Deutsche Bank and Société Générale identified the congressional composition as a constraint on his legislative agenda and fiscal expansion.

Bolsonaro is challenging the result over an extension of voting hours, according to Société Générale. The bank also highlighted unresolved debt concerns and the difficulty of securing fiscal consolidation under the new congressional balance.

Central Banks & Macroeconomics

Fed Futures Price Small Chance of October Increase After September Hike

Federal funds futures implied a 10% probability of an increase at this week’s Federal Reserve meeting, while an increase at the December 9 meeting was virtually fully priced, according to Brown Brothers Harriman’s Elias Haddad. The current target range is 3.75–4.00%, following a 25-basis-point increase in September.

Haddad cited calls for patience from several key Fed officials in forecasting an unchanged rate this week. He also pointed to October’s composite purchasing managers’ index as evidence of strong private-sector growth, alongside a sharp increase in selling prices. The U.S. Dollar Index lost ground during Monday’s Asian trading.

Japan Swaps Price 75% Chance of December Rate Increase

Japanese interest-rate swaps priced a 75% probability of a 25-basis-point Bank of Japan increase to 1.50% at the December 18 meeting and nearly 75 basis points of tightening over the next 12 months, according to Brown Brothers Harriman.

The bank’s Elias Haddad expects the BoJ to leave its policy rate at 1.25% at its upcoming meeting while assessing September’s 25-basis-point increase. Governor Kazuo Ueda warned in September that rapid rate increases could unsettle asset prices and said confirming that 2% inflation was entrenched could take time.

USD/JPY turned lower after an initial uptick at the start of Monday’s trading, leaving the yen near a one-month high against the dollar.

Canada Swaps Price 85% Chance of Rate Increase as Inflation Exceeds Projection

Canadian interest-rate swaps priced an 85% probability of a Bank of Canada increase this week, according to Brown Brothers Harriman. Its strategist Elias Haddad expects a 25-basis-point increase to 2.50%, following an unchanged policy rate since December 2025.

Governor Tiff Macklem recently warned that “the risk that inflation broadens and becomes more persistent has gone up.” September headline consumer inflation was 3.1% year on year, above the bank’s 2.5% third-quarter projection. Second-quarter real GDP grew at a 3.3% annualised rate, compared with the bank’s 2.5% projection.

The average of CPI trim and median was 1.85% year on year in September, slightly below the central bank’s 2.0% third-quarter projection. Brown Brothers Harriman also noted an increase in firms’ one- and two-year inflation expectations.

Energy, Trade Policy & Geopolitics

WTI Retreats Toward $100 After Trump Rules Out Immediate Iran Strike

WTI crude futures on NYMEX retreated toward $100 on Monday from a five-month high of $103.28. Earlier in Asian trading, oil hovered around $101.10, following a gain of more than 4% in the previous trading session.

U.S. President Donald Trump ruled out immediate military action against Iran on Sunday, saying “there will not be a strike today,” Al Jazeera reported. The oil retreat also came ahead of monetary-policy announcements from several major central banks.

China Opposes Proposed Expansion of U.S. Investment Restrictions

China objected to a U.S. Treasury proposal to broaden and strengthen restrictions on U.S. investment in China, including biotechnology. A Chinese official said Beijing “firmly opposes” the proposal, Bloomberg reported.

The official described the proposed restrictions as discriminatory and “a typical example of an overly broad application of national security concerns.” The measures remained a proposal rather than an announced final rule.

Houthis Threaten Further Attacks After Riyadh Airport Resumes Flights

Yemen’s Houthis said on Sunday that they would continue attacking Saudi Arabia’s King Khalid Airport in Riyadh, Reuters reported. The statement came hours after the kingdom announced that flights had resumed despite repeated Houthi attacks.

Upcoming Key Events

• Federal Reserve Policy Decision — Wednesday, 28 October 2026 (United States): The FOMC is scheduled to announce its monetary-policy decision.
• Bank of Japan Policy Decision and Outlook Report — Japan: The BoJ’s monetary-policy announcement and Outlook Report are due this week.
• Bank of Canada Policy Decision — Canada: The BoC’s monetary-policy decision is due this week.
• September PCE Inflation and Third-Quarter GDP — Thursday, 29 October 2026 (United States): September PCE inflation and third-quarter real GDP are scheduled for release. Brown Brothers Harriman cited forecasts for headline PCE of 0.5% month on month and 3.6% year on year, versus August’s 0.3% and 3.4%; core PCE of 0.3% and 3.1%, versus 0.2% and 3.0%; and annualised GDP growth of 3.2%, versus 2.2% in the second quarter. The Atlanta Fed’s GDPNow and New York Fed GDP Nowcast estimates stood at 3.5% and 2.7%, respectively.
• Announced U.S.–Ukraine–Russia Trilateral Meeting — United States / Ukraine / Russia: Ukrainian President Volodymyr Zelenskyy said a trilateral meeting between Kyiv, Washington and Moscow would take place in November, Reuters reported on Sunday.