Futures Mixed As America Votes, Apple Slides And Oil Rebounds After "Defensive" US Strike On Iran

US futures are down but off session lows, with Nasdaq contracts edging higher, as America heads to the polls for the midterms, chips rebound even as Apple slides on a gross margin warning and Palantir tumbles on a soft outlook, and oil bounces off Monday's 8% plunge after the US struck Iran's Qeshm Island in what officials called a "small-scale" and "defensive" attack; as a result the oil-driven bond rally takes a breather with the 10Y yield edging up to 4.93%. As of 8:00am ET, S&P futures are down 0.1% at 7,564 while Nasdaq futures are up 0.3% and Dow futures are down 0.6% some 300 points to 51,826. On Monday the S&P reversed a 1% gain to close down 0.5% at 7,541 and the Nasdaq 100 slid 1.4% into a correction, 10% below its October 6 peak, even as the equal-weight S&P rose 0.7% and the Dow added 0.4%. In premarket trading, semis and memory names are bid again while software lags, with Shopify plunging 19% and Dynatrace 15%; Apple drops about 4%, after the stock initially traded flat in the immediate aftermath of the report as we noted last night, while Nvidia rises 1.5% (Apple closed Monday as the world's most valuable company, only narrowly ahead of Nvidia, so that title is in play). The day's driver is the vote (with Iran in the background, again): Polymarket assigns a 94% chance of a Dem House and a 78% chance of a Dem Senate, an outcome which markets fear means more AI regulation and more hurdles for the data center buildout, with the Texas governor race seen as the one to watch for the AI trade; meanwhile US-Iran headlines swing between mediator proposals and Tehran declaring it is "now in a state of war" after the Qeshm strike. Treasuries are broadly flat and outperform European bonds, which slide as oil and Dutch gas rebound and ECB speakers sound hawkish. The Bloomberg Dollar Spot Index is up 0.1%, the Aussie lags after the RBA's split 6-3 hike was read as dovish, and the onshore yuan snapped its longest winning streak in three decades after the PBOC raised FX reserve requirements. In commodities, WTI rises 2% to about $98.45 and Brent trades above $105, gold drops 0.9% and silver slides below $50, while copper slips under $14,000; Bitcoin dipped to $76,240 before rebounding above $77,000. US economic data slate includes September JOLTS job openings, factory orders and final durable goods (all at 10am); there are no scheduled Fed speakers, and the Treasury sells $100 billion of 6-week bills at 11:30am. Polls start closing at 6pm ET.

In premarket trading, Mag 7 stocks are mixed: Apple (AAPL) -4%, Microsoft (MSFT) -0.6%, Tesla (TSLA) -0.09%, Amazon (AMZN) +0.2%, Meta Platforms (META) +0.3%, Alphabet (GOOGL) +0.4%, Nvidia (NVDA) +1.5%

Apple (AAPL) drops about 4% after delivering a mixed outlook to investors in its first quarterly report under Chief Executive Officer John Ternus, with tightening profit margins overshadowing an upbeat sales forecast.
Aehr Test Systems (AEHR) jumps 13% after the semiconductor testing equipment maker raised its full-year revenue outlook to the top end of its previous guidance range, above the Wall Street consensus.
Bloom Energy (BE) gains 6% after California Resources Corp. announced the signing of a memorandum of understanding with the fuel cell company to advance decarbonized power across California.
Clorox (CLX) rises 2% after reporting adjusted earnings and revenue that topped estimates for its fiscal first quarter.
CVR Energy (CVI), a refiner controlled by billionaire investor Carl Icahn, about 1% after agreeing to buy two oil-processing plants and a marketing platform from Marathon Petroleum for about $4.2 billion.
Dynatrace (DT) sinks 12% after the software company gave an adjusted profit forecast for the third quarter that fell short of the average analyst estimate.
Ethos Technologies (LIFE) gains 10% after the insurance platform said third quarter revenue grew 151% from the year-ago period.
Harmonic (HLIT) gains 16% after the communications equipment company reported third-quarter results that beat expectations and gave an outlook that is well above the analyst consensus.
Lattice Semiconductor (LSCC) gains 10% after providing a better-than-expected forecast for 4Q revenue, lifting shares by 9.0%.
ON Semiconductor (ON) rises 2% after the chipmaker’s fourth-quarter sales forecast largely beat expectations and it agreed to acquire Ferric for $600 million in cash.
Palantir (PLTR) falls 7% after issuing a quarterly outlook that pointed to a potential slowdown in sales growth, with revenue expected to be roughly $2.65 billion in the three months ended Dec. 31.
Revvity (RVTY) jumps 7% after the life sciences company boosted its outlook for organic revenue growth and adjusted profit for the full year, following third-quarter results that were better than expectations.
Shopify (SHOP) slumps 16% after the e-commerce firm reported subscription revenue for the third quarter that fell short of the average analyst estimate.

In other corporate news, the AI bill keeps growing: Anthropic disclosed more than $895 billion of spending commitments, almost all of it computing power, as we reported yesterday, while Oracle sold $10 billion of bonds and about $9.9 billion of stock in a single day (blowing through its four-year "hard cap"), Alphabet placed €6 billion in the euro market and Meta is eyeing at least $20 billion from a potential multi-currency bond offering. Walt Disney is moving toward thousands of job cuts, with some managers asked to target 20% in annual cost savings (the unhappiest place on Wall Street). CVR Energy agreed to buy two refineries and a marketing platform from Marathon Petroleum for about $4.2 billion, backed by $2.5 billion of committed secured debt financing, while Apollo said new lending hit a record in the third quarter even as adjusted earnings missed, and ADM and Pfizer boosted their 2026 outlooks. Meta is wrapping up investor meetings today for its dollar and euro bond sale, after Monday's $27.9 billion investment-grade haul. Brookfield and QIA will invest £2.5 billion in a Drax data center, and Bridgepoint shareholders are selling about 25 million shares in an accelerated bookbuild. Other earnings before the open include Eaton, Marathon Petroleum, Ferrari, Energy Transfer, Sysco, Keurig Dr Pepper, Fiserv and Yum! Brands; AMD, Super Micro, Arista, Amgen and Booking report after the close.

Global stocks are trading with little conviction ahead of the looming midterm election results, as Bloomberg's Macro Squawk put it, and in Europe price action is a mirror image of Monday, with cyclicals lagging defensives alongside higher oil prices. Monday's tape was the same story with a new oil price: the drop in crude supported tech for about half a session before the rebound faded, the Philly semiconductor index fell 3.4% on top of Friday's 7.2% slump and sits below its 200-day average for the first time since June 2025, while the rest of the market carried on without it (recapped here). The S&P closed at 7,541, below its 100-day support, and Bloomberg notes the midterm count will decide whether the 200-day mark about 3% lower becomes the next line of defense.

The bill that is stoking the doubts got even bigger on Monday, with Anthropic's $895 billion of commitments and Oracle's $20 billion debt and equity raise. Pimco's Emmanuel Roman put the AI financing need at about $2 trillion a year and said that it's "going to be too much." None of that stopped the year's biggest deal: Marvell agreed to buy Lumentum at an enterprise value of $115 billion in stock, and the market sold both sides, with Lumentum down 19% and Marvell 13%.

“This is more of an extension of sell-off,” said Anna Wu, an investment strategist and founder of Floodlines Research. “With US midterms today and the Iran risk after them, investors are cutting tech exposure first.”

“There is a high risk that the Democrats will tighten regulation of the artificial intelligence sector,” said Alex Kuptsikevich, chief market analyst at FxPro. “This will provide yet another argument in favor of a selloff in tech shares and will deal a blow to American exceptionalism and the US dollar.”

Which brings us to the main event: votes for the entire House, a third of the Senate and 36 governors. Prediction markets are near-unanimous: Kalshi has the Democrats at 94% to take the House, 75% to take the Senate and 74% for a sweep of both chambers, with a Dem House and GOP Senate at just 20%.

The historical playbook is friendly: DB's Jim Reid notes that the S&P 500 has been higher one year after the midterms for all 20 midterm votes since WWII, and that the outcome may not be known by morning (the AP called the House only 8 days after the 2024 vote). The near-term playbook is less so, which is why the likeliest outcome is also the worst for stocks (see also the 3 midterm outcomes and how they'd move stocks). Citi says a blue sweep looks priced and the outliers matter, while Goldman's Dioni Ellinikaki writes that "a Democratic House looks largely priced, with the Senate representing the main source of election related surprise," adding that "fears of a nationwide data-centre crackdown are overdone."

JPM's Market Intel desk under Andrew Tyler says many client conversations are focused on the Texas governor race, where incumbent Abbott is favored but Hinojosa remains in striking distance, "with many thinking a Dem victory is Tech / AI negative given the ties to data centers." JPM's Ilan Benhamou calls Texas "the most critical to AI and thus to markets," and notes the options market prices an SPX move of about 0.9% for Wednesday, the same as payrolls day, versus about 0.7% for a normal day, so "the vote is treated as a non-event which makes the event VERY INTERESTING." JPM's scenario map gives a blue wave a 66% probability (SPX "down 25bp to gains 50bp"), a split Congress 26% (SPX gains of 0.5% to 1%) and a red wave 7%. Tyler is sticking with his Tactically Bullish call and expects a tech rebound, arguing that the biggest non-AI risk is a Middle East re-escalation but that "oil markets appear to have already priced this outcome."

Goldman's Rich Privorotsky is less sanguine on that last point: "I'm a little nervy that the market got ahead of itself on oil... there's a risk of re-escalation after the midterms." On tech, he writes that it "feels like the rolling ball of de-grossing hasn't stopped," after Gen AI baskets fell 5%, optical 7.5%, neoclouds 6% and high momentum 7% on Monday, while homebuilders rose 4%. He also notes that the SOX trades at about 12.16x blended 24-month forward P/E, "approaching 2022 levels," and Nvidia at 10x, "its lowest multiple since 2013." On Apple, he says "AI demand is supporting memory pricing, but also competing for components and squeezing margins elsewhere." Goldman's US sales trader Ariana Contessa says semi sell tickets were "met with virtually zero demand/defense", with asset managers moderate net sellers of tech and hedge funds moderate net buyers (short covering) in a quiet session, with desk activity at 3 out of 10.

Goldman's Amanda Lynam adds that hyperscalers have issued $271 billion of debt year-to-date, already above GS's full-year forecast of $250 billion, with more than $40 billion announced since October 29, and that "evidence of monetization by 2028 is key to mitigating downward pressure on debt ratings in the AI ecosystem." And as Bloomberg's Simon White warns in his MacroScope column, with margin debt at about $1.5 trillion and hedge funds owing nearly $4 trillion to prime brokers, tightening liquidity leaves markets increasingly prone to funding squeezes and margin calls.

Oil is the part of the tape Europe can use: Brent tumbled 7.6% on Monday to $104.77 after Iran's president said he had been given more authority to negotiate and Trump hinted at progress, and European gas fell almost 9%. That rally reversed partially overnight after the WSJ reported the US struck Iran's Qeshm Island in "the latest of a series of limited strikes Washington has secretly carried out against Iran in recent weeks", and a senior Iranian official told Reuters a deal remains out of reach.

In Europe, the Stoxx 600 is down 0.4% at 647.16, with 386 members down and 203 up, as the selloff in US chipmakers spreads to Europe while healthcare shares get a boost from Bayer and Philips earnings. The FTSE 100 and Euro Stoxx 50 are both down 0.5% and the DAX drops 0.6%, with Germany and Spain the biggest laggards. Defensive sectors lead, with health care on top, while basic resources, tech and media lag. JPM's desk says value and momentum are leading while volatility and cyclicals lag, with renewables, diesel and defensive baskets outperforming and AI and software plays lagging. Here are the biggest European movers:

Bayer shares are up as much as 6.4% after the German company topped third-quarter sales and earnings estimates and boosted its full-year adjusted Ebitda forecast.
Philips shares gain as much as 7.1% before trimming the move after the Dutch medical-device maker reported third-quarter results, with analysts highlighting strong order growth and a better-than-expected margin performance.
International Workplace shares rise as much as 10% after the Swiss workspace solutions company reported third-quarter revenue that came in ahead of estimates.
AcadeMedia shares rise as much as 7.6% after SEB upgrades the Swedish educational services firm to buy from hold, noting low valuation and a strong shareholder yield.
Coloplast shares drop as much as 7.2% after the Danish medical-products maker reported a fourth-quarter miss on adjusted Ebit and lowered both its full-year 2026/2027 guidance and mid-term outlook.
Adidas drops as much as 3.2% after UBS downgrades to sell from neutral, giving the sportswear maker its only negative analyst rating, citing a “materially more challenging underlying environment.”
Alstom falls as much as 10%, extending declines after the French train maker was downgraded at JPMorgan and Oddo following Monday’s profit warning.
TeamViewer shares plummet as much as 26% after the German software company cut its full-year revenue forecast, citing delayed conversion of large enterprise deals and economic uncertainties in Europe.
AB Foods falls as much as 4.2% after the company warned FY27 adjusted operating profit is likely to be lower than 2026, mainly due to its sugar segment, and didn’t announce a share buyback.

Asian stocks fell as the chip rout deepened on concerns over AI spending, with the MSCI Asia Pacific ex-Japan index dropping as much as 1.3% and tech-heavy markets hit hardest. South Korea's Kospi tumbled 3.8%, with SK Hynix down 5% and Samsung down 4.1%, despite softer-than-expected October CPI of 2.8%, and Taiwan's Taiex slid 3.6% to its lowest since end-July; Goldman's Asia Prime desk says Taiwan was the most net-sold market in Asia in October, with hedge fund net allocation down to 5.9% from 7.5% in early October. Japan was closed for Culture Day. Indonesia's JCI also dropped 3.8%, with the rupiah at 18,139 and the 10Y yield at 7.80%, a more than six-year high. Elsewhere, the ASX 200 rose 0.3% after the RBA hiked as expected, India's Nifty gained 1.2%, and Hong Kong's Hang Seng rose 0.3% for a third straight gain as the Hang Seng Tech index rose on buying of non-AI names. In China, the CSI 300 fell 0.2% and the STAR50 slumped 3.8%, as Beijing's latest market-support measures, including liquidity steps, cheaper buyback loans and eased leverage curbs, failed to impress, though stocks bounced into the close on chatter that regulators would slow IPOs; the FT later reported the CSRC told banks to pause IPOs and large share sales (Beijing's stock rescue turns more desperate). “Beijing’s latest support offers a glimmer of light amid the gloom surrounding Chinese equities, but it’s premature to expect policy relief to translate into a vote of confidence in a fundamental turnaround,” said Hebe Chen, market analyst at Vantage Global Prime.

In FX, the Bloomberg Dollar Spot Index is up 0.1% while the DXY is essentially flat in a thin 101.62 to 101.87 range as Americans vote. Newsquawk notes a Democratic sweep would "undoubtedly be USD-negative in the short term", while a Dem House and GOP Senate may be more favorable for the dollar. The Aussie is the G10 laggard, down about 0.3% within a 0.6962 to 0.7003 range, after the RBA raised rates 25bps to 4.85%, an 18-year high, but three of nine board members dissented and Governor Bullock declined to provide guidance. The Swiss franc pared early gains after Swiss CPI accelerated to 1.5% in October, the highest in almost three years, versus 1.3% expected. EUR/USD is little changed near 1.1195, cable at 1.3417 and USD/JPY at 157.94. The onshore yuan ended its longest winning streak in three decades after the PBOC raised the FX reserve requirement ratio by 2 points to 6% from November 15; Goldman's Sun Lu sees 6.68 to 6.69 in USD/CNH as a good fade zone, while GS's Skyler Qian calls the hike "more symbolic than its actual impact on USD liquidity."

In rates, Treasuries are broadly flat and outperform their European peers, with the 10Y yield up about 1.5bps at 4.93% as of 7:30am after falling to its lowest level since early September on Monday as oil plunged. USTs trade a handful of ticks lower within 106-21 to 106-27. Monday's quarterly refunding announcement trimmed the Q4 borrowing target by $10 billion to $618 billion but put Q1 needs at $800 billion, at the high end of expectations and a reminder of the United States' elevated fiscal needs, as DB's Reid put it. European bonds slip, pausing Monday's rally, as oil and Dutch TTF rebound and ECB speakers sound hawkish: Radev said the October pause does not mean the tightening cycle is over, and Moulin said the ECB must prevent inflation from spreading beyond energy. Bunds are down about 20 ticks and gilts underperform, down 35 ticks around the 86.00 handle; Germany's 5-year Bobl sale drew just €3.839 billion against a €5 billion target. Mizuho's Evelyne Gomez-Liechti warns investors not to buy the narrative that a divided US government would curtail spending after the midterms, while Australian short-end bonds rallied as the split RBA vote dimmed the chance of another hike.

“Attention should be paid to the possibility that President Trump, entering the latter half of his term, increasingly turns towards foreign and trade policy, where he faces fewer congressional constraints, as he seeks to build his legacy,” said MUFG strategist Masayuki Nakajima.

In commodities, WTI December futures trade toward the middle of a $96.12 to $98.69 range, and Brent January is in a $104.27 to $107.24 range, closer to the upper end, as crude trims part of Monday's 8% slump on the Qeshm strike headlines and Iranian comments that a deal remains far off. Dutch TTF has rebounded to around €97.50/MWh from about €94 earlier, and Goldman raised its 2027 TTF forecast to €51/MWh. Saudi Aramco posted a 9% increase in third-quarter profit and said it will maximize production this quarter after exports returned to near prewar levels in October, while Middle East oil market metrics indicate near-term supply is outpacing demand for the first time since July. Iran's IRGC Navy said three tankers caught fire and exploded in the Strait of Hormuz after striking naval mines, and a refinery in Russia's Yaroslavl was damaged in a Ukrainian drone attack. Spot gold trades in a $3,895 to $3,964 range, almost wiping out Monday's gains, spot silver dipped below Monday's $49.33 low, and LME copper is under $14,000 in a $13,896 to $14,286 range.

US economic data slate includes September JOLTS job openings, factory orders and final durable goods orders (all at 10am). There are no scheduled Fed speakers; BoC's Macklem and Rogers speak to lawmakers at 11am, and the Treasury sells $100 billion of 6-week bills at 11:30am. Polls start closing at 6pm ET. Earnings from AMD, Super Micro, Arista, Amgen and Booking are due after the close.

Market Snapshot

Top Overnight News

The U.S. attacked Iran’s Qeshm Island on Monday, U.S. officials said, in the latest of a series of limited strikes Washington has secretly carried out against the country in recent weeks as President Trump touted the possibility of a diplomatic deal. WSJ
U.S. Vice President JD Vance on Monday said he was optimistic about reaching a “negotiated settlement” with Iran. An Iranian official says the two countries remain far from reaching a deal as Tehran threatens retaliatory strikes in the region and beyond. CNBC
Iran and the US are reviewing the latest mediator proposals aimed at bridging differences and averting another war; Qatari mediators held talks with Iranian officials in Tehran on Monday, which were described as positive. BBG
Iran's IRGC Navy said three tankers caught fire and exploded in the Strait of Hormuz after striking naval mines in the early hours while travelling through unauthorised routes with navigation and identification systems switched off. IRIB
Saudi Aramco will maximize oil production this quarter, the company’s chief said, as it looks to keep cranking up shipments after exports returned to near prewar levels in October. BBG
America’s referendum on President Donald Trump’s second term is underway, with polls set to open Tuesday morning for the US midterm elections and tens of millions of early ballots already cast. BBG
The Supreme Court rejected the Trump administration’s emergency bid to set aside about 20,000 California ballots. BBG
Nvidia is ordering its data center partners to reduce exposure to Chinese customers in a move that further restrains China’s ability to keep up with US rivals as the race between the world’s two AI superpowers intensifies. FT
Anthropic disclosed a twelve-fold increase in quarterly revenue while revealing that it intends to spend more than $895 billion in the years ahead, as the AI lab courts investors for a potentially record-breaking IPO. BBG
Artificial intelligence-related financing could grow to about $10 trillion over the next five years, eventually reaching excessive levels, said Emmanuel Roman, chief executive officer of Pacific Investment Management Co. BBG
Walt Disney is moving toward thousands of job cuts with the company asking some managers to target 20% in annual cost savings, according to people familiar with the matter. BBG
Chinese regulators have told banks to hold fire on company listings and large share sales in an effort to bolster the country’s struggling stock markets. FT
China said it would increase the reserve requirement on FX deposits in a move aimed at reducing appreciation pressure on the yuan. SCMP
Australia's central bank Governor Michele Bullock signaled a wait-and-see approach to further tightening after policymakers lifted the benchmark rate to an 18-year high. The RBA board voted six-to-three in favor of raising the key rate for a fifth time this year, omitting a reference that it was willing to hike further if needed. BBG
The US has arranged trilateral peace talks with Moscow and Kyiv in Abu Dhabi next week to discuss ending the war in Ukraine, the first time the three sides will have met since February. FT
The US is planning to ask NATO allies to contribute more money to a key weapons-delivery program for Ukraine, people familiar said. The request may come as soon as this month. BBG
Switzerland’s inflation rate rose to the highest level in almost three years, driven by the surge in oil costs and a weaker franc. BBG
Euro-area governments have been asked to submit nominations for successors to European Central Bank President Christine Lagarde by Friday. BBG
CVR Energy said it has $2.5 billion of committed secured debt financing to help fund its planned $4.2 billion acquisition of Marathon refining and marketing assets. BBG
Hyperscalers have issued $271 billion of debt year-to-date, above Goldman's 2026 full-year forecast of $250 billion, with more than $40 billion announced since October 29; "evidence of monetization by 2028 is key to mitigating downward pressure on debt ratings in the AI ecosystem." GS

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed following the continued tech rout stateside, where most major indices were negative, and the Nasdaq 100 dipped into a correction, although the majority of US sectors finished in the green and oil prices slumped 8% due to hopes for diplomacy, while demand was contained overnight amid the holiday closure in Japan and cautiousness heading into the US midterm elections. ASX 200 was indecisive heading into the RBA announcement, but finished in the green after the central bank hiked rates as expected, with the decision made by a 6-3 vote, while it remained hawkish but stopped short of signalling a December hike. KOSPI underperformed following the tech rout stateside and despite the softer-than-expected CPI data, which printed 2.8% vs exp. 2.9%, but remained above the central bank's medium-term target. Hang Seng and Shanghai Comp traded mixed despite authorities launching a renewed effort to stabilise the stock market, including measures to boost liquidity, cut rates for share buy-back loans and ease curbs on leveraged trading.

Top Asian News

PBoC announced it will raise the forex reserve requirement ratio by 2ppts from 4% to 6% effective November 15th, while the measure is aimed at improving the management of foreign currency liquidity in financial institutions.
China's CSRC has reportedly instructed investment banks to pause IPOs and large share sales through informal guidance in an effort to support the country's struggling stock markets, according to the FT citing sources.

European bourses (Stoxx 600 -0.3%) begin Tuesday’s trade on the back foot, reversing the broad gains seen on Monday. Crude benchmarks have pared some of Monday’s c. 8% losses, after reports that the US hit Qeshm Island and a senior Iranian official told Reuters that a deal is still out of reach. To add to the downbeat tone were disappointing earnings from Apple and Palantir. Sectors have a negative bias. Defensive sectors lead, with Health Care topping the sector pile. The sector laggard is Basic Resources, with Tech and Media following closely behind. Key movers include: Bayer, Q3 metrics beat and raised its FY adj. EBITDA guidance; Lufthansa, trimmed its FY adj. EBIT guidance while lifting its fuel cost forecast; Philips, sales matched expectations while reiterating its FY outlook and announcing a settlement with the US DoJ regarding faulty sleep apnoea devices. US equity futures are mixed, with outperformance in the NQ despite downside in Apple and Palantir pre-market. Starting with Apple, it gave a mixed report, with tightening Q1 gross margin guidance (45-46%, exp. 47%) overshadowing an upbeat sales forecast (7-10%, exp. 6.1%). As a result, shares are lower pre-market by 3.7%. For Palantir (-7.9% pre-market), its outlook also disappointed, as it expects Q4 sales that point to a slower rate of growth.

Top European News

German Chancellor Merz said they need to ensure that the electricity tax is reduced in the 2027 budget, and has some ideas on how to do this while calling for further reductions in air traffic tax.
Germany's HDE Lobby Group sees 2026 German Retail Sales +2% in nominal terms, +1% in real terms.

G10s are mixed against the USD. The CAD, GBP and CHF are flat, with the latter scaling back some of its earlier outperformance following a hotter-than-expected CPI report. The AUD lags following the RBA’s decision to hike rates by 25bps (as expected), though the Bank did not signal further action.
DXY is essentially flat and trades within a thin 101.62 to 101.87 range. Action which comes as Americans head to polling stations for the midterms, where a Democratic sweep is likely, according to major prediction market odds. Kalshi assigns a 76% chance of a Dem Senate, and a 94% chance of a Dem House. This outcome would undoubtedly be USD-negative in the short term given the implications for passing policy, slower growth and the increased chance of a government shutdown. Perhaps a more favourable outcome for the USD would be a Dem House and a GOP Senate.
CHF was initially the outperformer this morning before paring back, following a hotter-than-expected CPI report. Headline Y/Y printed at 1.5% (vs exp. 1.3%), and pertinently above the Bank’s Q4 average forecast of 1.2%; importantly the Core Y/Y metric remains unchanged at 0.5%, evidence that second round effects are yet to enter the Swiss economy. A report which keeps the headline within the SNB's 0-2% target range, but if the upturn in inflation continues, money markets will likely bring forward rate hike bets towards mid-2027.
The Aussie is the clear underperformer this morning, in the aftermath of the RBA policy announcement, alongside losses in copper and gold. The Bank hiked its Cash Rate by 25bps to 4.85%, as expected. There were a few hawkish elements from within the release, namely the RBA sees materially higher inflation (as per its latest forecasts), and noted that risks to inflation are to the upside. On the dovish side (and driving the AUD downside), the decision was subject to dissent from three members, who opted to pause rates. Moreover, the Bank refrained from any hawkish guidance; Governor Bullock stated that she will not be offering guidance, adding that it is “probably good to wait now and see incoming data”. Overall, the RBA sounded a bit more cautious than in previous meetings, which has led AUD/USD to trade with losses of c. 0.3%, within a 0.6962 to 0.7003 range.

Central Banks

RBA raised its Cash Rate Target by 25bps to 4.85%, as expected, in a 6-3 vote, with three members favouring a hold at 4.60%. RBA noted that inflation remains elevated, with risks still skewed to the upside, and revised its inflation outlook materially higher in its updated staff forecasts, while it stated that inflation is now expected to remain elevated through much of 2027, with the top of the 2-3% target range not reached until late 2027. The Board reiterated its commitment to returning inflation sustainably to target and said monetary policy remains well positioned to respond to developments, while it remains focused on price stability and full employment. It also noted that rate hikes since the start of the year have tightened financial conditions and that output growth is expected to slow further over the coming year, easing capacity pressures and helping inflation return to the target.
RBA Governor Bullock said the rate hike was needed to bring inflation down and address domestic capacity pressures, with growth needing to remain subdued and unemployment expected to rise further. Inflation is largely baked in for the next year, while the RBA is not forecasting a recession. Additionally, she said it is probably appropriate to wait for incoming data, does not know how high rates will need to go or what the next move will be, and is not providing forward guidance.
ECB's Radev said the economic environment is getting more challenging and that the October pause does not mean the tightening cycle is over. Said core inflation is stable, and the energy shock has not passed on to wages.
ECB's Moulin said the ECB must prevent inflation from spreading beyond energy.
SNB's Schlegel said inflationary pressure in September was slightly higher than in June.

Fixed Income

A modestly bearish session for the space. USTs are lower by a handful of ticks in 106-21 to 106-27 parameters. In short, we await the start of the US midterms (Newsquawk preview and dashboard available), while on the lookout for any further geopolitical updates after Monday’s limited kinetic action and the commentary from Iran.
To recap, the US targeted Qeshm Island in a limited strike, aimed at preventing Iran from aggression within the Strait of Hormuz. Since then, sources report that while Qatari mediators were involved in recent days, the Iranian assessment is that a return to war is the most likely scenario; though political figures within Iran are reportedly pushing for a de-escalation.
Amidst this, EGBs react to the energy upside, posting pressure of about 20 ticks. Pressure that is seemingly a function of the moves seen in global energy benchmarks, and specifically Dutch TTF, which is bid by c. EUR 2/MWh. No reaction to the morning’s ECB speak, which has stuck to the script.
Gilts, as is often the case, underperform amidst this energy move. Lower by 35 ticks at the time of writing, but some 15 clear of the 85.85 base and holding around the 86.00 handle. UK specifics focused on the government's EU relationship, ahead of the EU-UK summit, with reports suggesting some progress has been made on various points; however, PM Burnham has clarified that he is not proposing the return of freedom of movement. A point the EU is particularly attached to.
Germany sells EUR 3.839bln vs. exp. 5bln 2.90% 2031 Bobl: b/c 1.4x (prev. 1.1x), average yield 3.14% (prev. 3.2%), retention 23.22% (prev. 33%).
UK sells GBP 3.25bln 4.625% 2037 Green Gilt: b/c 3.38x (prev. 3.31x), average yield 5.268% (prev. 4.934%), tail 0.3bps (prev. 0.2bps).

Commodities

WTI Dec and Brent Jan futures are attempting to trim some of yesterday’s losses, following the 8% slump on Monday, which saw WTI relinquish the USD 100/bbl level. Losses yesterday came amid hopes of diplomacy, although the partial rebound overnight was facilitated by reports of explosions and that the US had attacked Iran's Qeshm Island. Choppiness was seen this morning amid mixed geopolitical headlines (more below), with WTI now towards the middle of a USD 96.12-98.69/bbl range (vs yesterday’s USD 95.15-102.75/bbl range) and Brent in a USD 104.27-107.24/bbl parameter (vs yesterday’s USD 103.28-112.41/bbl range), but closer to the upper end. Dutch TTF has rebounded to around EUR 97.50/MWh from lows of around EUR 94/MWh this morning.
In terms of geopolitics, there were overnight reports of explosions and that the US had attacked Iran's Qeshm Island, while the attack was described as small-scale, defensive and aimed at denying Tehran the freedom to attack commercial ships in the Strait of Hormuz.
This morning, the geopolitical flurry continued with early-door source reports suggesting that Iran and the US are far from reaching a deal to end the war, while the US' excessive demands will not be accepted by Iran. Further, Qatari mediators were in Tehran on Monday for talks with Iran, which some reports suggested were positive and that Iran and the US were reviewing the latest suggestions from mediators. It was then reported that Qatari mediators went to Tehran only to receive Iran's response, not for further discussions, and sources said political figures inside Iran were pushing for de-escalation. Pakistani journalist Mallick mentioned that to his understanding, an agreement to return to the negotiation table between US-Iran is in the works, but not as close as some had suggested.
Precious metals are weaker as crude rebounds, with spot gold almost wiping out all of yesterday’s gains, while spot silver is now below Monday’s low, all despite a relatively flat USD ahead of the US midterms. Spot gold trades in a USD 3,895-3,964/oz range (vs yesterday’s USD 3,874-3,970/oz range). Spot silver underperforms after dipping under yesterday’s USD 49.33/oz low. Analysts at ING “expect gold to regain some ground following its recent correction. But the near-term outlook remains challenging amid expectations for higher rates and a stronger dollar, limiting the scope for a more sustained recovery.”
3M LME copper is also on the back foot and under the 14k mark in a current USD 13,896.05-14,286.35/t range at the time of writing.
Saudi Aramco CEO expects global liquid fuel demand to rise by c. 2.4mln bpd by 2027 and warned energy markets will face pressure this winter. Said the East-West pipeline expansion is underway, China is increasing crude purchases and Aramco remains ready to rapidly increase production if needed. Added that exports resumed within days following attacks on the East-West pipeline.
ADNOC Gas CEO said gas demand will continue growing in the long term and emphasised the need for more energy and diversified supply.
Goldman Sachs raised 2027 TTF Average Price Projection to EUR 51/MWh from EUR 44/MWh to reflect a 45% chance of a low-winter-Mideast LNG supply scenario.

Trade/Tariffs

China's MOFCOM said Vice Minister Li met with a US agricultural trade delegation, with both sides exchanging views on China-US economic and trade relations and agricultural trade cooperation.
UK and EU agreed a draft deal on removing post-Brexit checks from food and agriculture exports.

Geopolitics: Middle East

US President Trump said Iran wants to make a deal and that could happen, while he added that Iran said even recently that they won't have a nuclear weapon.
CIA Director Ratcliffe was reportedly advising US President Trump to maintain the 'no war, no deal' status quo and allow the economic pressure campaign to continue, while he said the prolonged economic pain will induce Iran to make more concessions or create enough instability in Iran that citizens revolt, according to sources cited by Axios's Ravid.
US attacked Iran’s Qeshm Island on Monday in the latest of a series of limited strikes Washington has secretly carried out against Iran in recent weeks as President Trump touts the possibility of a diplomatic deal, while the attacks were described as small-scale and defensive, aimed at denying Tehran the freedom to attack commercial ships in the Strait of Hormuz, according to US officials cited by WSJ.
US source told the Jerusalem Post that the US was behind the attack on Qeshm Island and stated it was a small incident intended for self-defence, while a US official cited by Axios's Ravid stated that the IRGC fired a missile from Qeshm Island at a US aircraft in the Strait of Hormuz on Monday night and a US fighter jet then eliminated the surface-to-air launcher in self-defence, with the attack also described as a small incident.
An agreement for Iran and the US to return to negotiations is reportedly in the works, although a deal is not as close as some suggest, according to journalist Mallick.
A senior Iranian official said Iran and the US remain far from reaching a deal to end the war despite intensified mediation efforts, Reuters reported. Tehran insisted its conditions must be met before the Strait of Hormuz is reopened, with nuclear talks only possible afterwards, and rejected Washington's "excessive demands".
Iran and the US are reportedly reviewing the latest mediator proposals aimed at bridging differences and averting another war, Bloomberg reported. Qatari mediators held talks with Iranian officials in Tehran on Monday, which were described as positive.
Qatari mediators reportedly travelled to Tehran solely to receive Iran's response rather than hold further talks, according to Al Arabiya sources. Iran's President, Parliament Speaker and Foreign Minister reportedly urged military authorities to respond positively to Qatar's proposal, although Iranian assessments suggest a return to war is now the most likely scenario.
Qatar's Foreign Ministry said mediation efforts to bridge differences between the US and Iran are ongoing, with both sides committed to the process. The Qatari delegation has returned to Doha following talks in Tehran, while Gulf countries remain united in seeking to avoid escalation. Said there is still hope for a deal that would pave the way for future negotiations.
Iranian diplomat Gharibabadi said the exchange of messages through Qatari mediation continues and that a diplomatic agreement is possible if Tehran's demands are met. He later said that diplomatic talks and message exchanges continue through Qatari mediation, with Iran's 7-day plan as the basis and an agreement is possible if Tehran's demands are met, while warning that any official threat to use tactical nuclear weapons would undermine the NPT's legal framework.
Iranian Parliamentary Speaker Ghalibaf said they are at the highest level of defensive readiness. He added that the ball is in the US' court, after a strong and rational response was provided to the US. He went on to say that Iran's armed forces' response to any enemy miscalculation will be unpredictable and not bound by geographical limits.
Iran's Foreign Minister Araghchi said Iran has no hostility towards GCC member states and appreciates the positive role of Qatar and Oman. Will continue talks with Saudi Arabia and aims to establish new regional security arrangements led by regional countries without the presence of foreign militaries.
Iran's Supreme National Security Council Secretary Rezaei rejected a Qatari proposal to establish direct communication between US diplomats and the Iranian delegation that visited Doha, according to Aram News citing sources.
Iranian Foreign Ministry said that they are now in a state of war following the targeting of Qeshm.
Iran is said to be ready with a more devastating response to US attacks and has preserved a significant portion of missile and drone capabilities and its weapons production capacity, and is more prepared than before, according to a report cited by IRIB.
IRGC Navy said three tankers caught fire and exploded in the Strait of Hormuz after striking naval mines in the early hours while travelling through unauthorised routes with navigation and identification systems switched off, IRIB reported.
Saudi Defence Minister said he discussed de-escalation efforts in the region and the Houthis' continued attacks during a call with US Secretary of Defence Hegseth.
Houthi spokesperson said the Yemeni Armed Forces confirm that they did not carry out any operation today towards Saudi territory.

Geopolitics: Ukraine

US envoy Witkoff said the US will mediate working-level talks between Ukraine and Russia in Abu Dhabi on November 10th-11th and that trilateral talks will cover ending the war and post-war security agreements, as well as de-escalation and aid measures, while he also stated that US officials are to meet this week in Brussels with France, Germany, UK, EU and NATO representatives to discuss Ukraine. Russia's Kremlin later confirmed the trilateral Ukraine talks.
US is planning to ask NATO allies to contribute more money to a key weapons-delivery programme for Ukraine, according to people familiar with the matter cited by Bloomberg.
Ukrainian President Zelensky said Russia launched a large-scale, coordinated overnight attack targeting Ukraine's critical infrastructure, primarily energy generation facilities and substations.
Russia said it carried out a large-scale overnight attack on Ukraine's energy facilities, while it was also reported that an oil refinery in Russia's Yaroslavl was damaged in a Ukrainian drone attack.
US, Chinese and Russian officials are reportedly in talks regarding a possible trilateral summit between the leaders later in November, according to the FT citing sources. The source added that it remains unclear whether the talks would happen trilaterally, or bilaterally between China-US and China-Russia, while suggesting that the US is pressuring China to agree to a meeting.

Crypto

Bitcoin briefly dipped below Monday's USD 76.55k low to a trough of USD 76.24k, before reversing to a high of USD 77.19k.

US Event Calendar

10:00am: Sept. JOLTS Job Openings, est. 7164k, prior 7079k
10:00am: Sept. Factory Orders, est. 1.2%, prior 0.1%
10:00am: Sept. F Durable Goods Orders, est. 1.8%, prior 1.8%
10:00am: Sept. F Durables Ex Transportation, est. 0.5%, prior 0.5%
10:00am: Sept. F Cap Goods Orders Nondef Ex Air, est. 0.5%, prior 0.5%
10:00am: Sept. F Cap Goods Ship Nondef Ex Air, est. 1.2%, prior 1.2%
11:30am: US to sell $100 billion of 6-week bills

Central Bank Speakers

No Fed speakers scheduled
11:00am: BoC Gov. Macklem, Senior Deputy Gov. Rogers Speak to Lawmakers

DB's Jim Reid concludes the overnight wrap

Welcome to midterms day and markets go into it again caught in the crosswinds between energy and AI themes. Global assets had traded much better for most of yesterday, as hopes for a resolution in the US-Iran conflict caused oil prices to tumble. Indeed, even if we account for the contract roll, the Jan 2027 contract for Brent crude oil was still down -7.63% on the day, closing at $104.77/bbl, which sent bond yields lower on both sides of the Atlantic too. While that initially also sparked an equity rally, the S&P 500 ended up reversing a +1% gain to close -0.51% lower as the tech sentiment again turned negative, sending the Nasdaq 100 (-1.39%) into technical correction territory.

After the bell, Apple then delivered a mixed set of results. While its Q3 sales slightly beat expectations ($114.5bn vs $113.5bn), the company projected a narrowing of its gross margin in the current quarter (45-46% vs 47% est.). Those margin pressures pushed Apple’s shares to a -3% decline in after-hours trading. This followed a -1.83% decline in yesterday’s regular session, which still left it as the world’s most valuable company, narrowly ahead of Nvidia.

Overnight, the KOSPI is down -3.76% after the tech losses in the US while S&P 500 (-0.19%) and NASDAQ futures (-0.12%) are lower again. Stoxx futures (-0.87%) are being harder hit as they closed before the late US sell-off.

Now onto the main event. Today includes votes for the entire House of Representatives (the lower chamber), a third of the Senate (the upper chamber), along with 36 state Governors. And when it comes to markets, it’s no exaggeration to suggest that midterm elections are one of the best historical buy signals for equities we have. Indeed, the S&P 500 has been higher one year after the midterms for all 20 midterm votes since WWII.

Currently, the Republicans control both chambers of Congress, but the incumbent President’s party usually loses ground in midterm votes. Moreover, polling averages and prediction markets are consistently pointing to Democratic gains today. For example, Polymarket gives the Democrats a 95% chance of victory in the House as of this morning, and a 79% chance of retaking the Senate.

In the House of Representatives, the Republicans only won a very narrow majority in 2024, with the chamber split 220-215 between Republicans and Democrats. So the Democrats require a net gain of just 3 seats to take control. Moreover, in 18 out of 20 midterm elections since WWII, the incumbent President’s Party has lost seats in the House. So the Democrats are very strong favourites to win a majority there. In the Senate, however, it’s a bit more difficult for them. Last time, the Republicans had a 53-47 edge, and because VP Vance has the tiebreaking vote, it means the Democrats would need to pick up 4 seats to take control. And only a third of the Senate seats are up for grabs, which limits the opportunity for pickups by the Democrats and makes the task of gaining control of the Senate more difficult. Current polls suggest this is very possible, and if you look at the RealClearPolitics average, the Democrats are currently ahead in North Carolina, Alaska, Texas, Maine, Ohio, and Kansas, all of which are currently held by Republicans.

It’s difficult to know exactly when we’ll know the outcome, and depending how tight any close races are, it might be some time after the election. For instance, in 2024, we knew that the Republicans had control of the Senate on election night. However, the narrow House majority meant that the Associated Press only projected a Republican victory in the House 8 days after the election. So it’s not a given we’ll know by the morning, even if we should have a good idea of the direction of travel.

Whatever the results are tonight, the new Congress doesn’t actually convene until January 3. However, even if the Democrats take just one chamber, that will have major implications for Trump’s legislative agenda, as all legislation requires majority support in both chambers of Congress. Notably from a market standpoint, that includes spending packages, as well as increases in the debt ceiling. So even if the Democrats just win in the House, it will constrain Trump’s room for manoeuvre. In addition, the Senate is the chamber that votes on presidential nominees, including cabinet appointments, Supreme Court justices and Fed Governors. So if the Democrats take the Senate as well (which hasn’t happened to Trump in either of his terms), then he’ll face a further constraint on who he can appoint.

However, even if the Democrats take control of both chambers, they’re still limited in what they can do. That’s because legislation still requires the President’s signature, and that can only be overridden if two-thirds of both chambers vote for it. So Trump still retains a veto power, even if Democratic majorities were to pass legislation he was opposed to.

With all that to look forward to, markets have put in a mixed performance over the last 24 hours, as the tailwind from a huge decline in oil prices was offset by continued AI concerns. To be fair, there was a contract roll that makes the headline decline look even bigger. But if you simply take the new active Jan 2027 contract for consistency, Brent crude oil still fell -7.63% on the day to $104.77/bbl. In part, that was a reaction to the Axios report we mentioned in yesterday’s edition, which said that Trump wanted to give diplomacy more time. But we then heard in the session that Iran’s Supreme Leader had given the government powers to hold peace talks, which added to hopes about some kind of diplomatic breakthrough. And later in the US session, we heard positive comments from Trump who downplayed prospects of renewed strikes against Iran, while Vice President Vance said he felt good about prospects of an Iran deal. Oil is back up half a percent this morning on a WSJ report of a US strike on Iran's Qeshm Island. The story hasn't been picked up widely though and goes against much of the commentary over the last 24 hours.

Indeed, that more dovish commentary yesterday led to a wave of relief across markets, as there had been fears of an escalation shortly after the midterm elections. This hope helped to drive a decent rally for European assets. In Europe, yields on 10yr bunds (-3.1bps), OATs (-7.3bps) and BTPs (-8.9bps) saw notable declines. This left the Franco-German 10yr spread tighter by -4.2bps on the day. European equities also saw a broad advance, taking the STOXX 600 (+0.42%) to its highest since early September, alongside gains for the DAX (+0.63%) and the CAC 40 (+0.98%).

The pullback in inflation expectations also supported Treasuries, with 10yr yields (-1.6bps) falling back to 4.91%, their lowest level since early September. That said, they did give up some of their advance later in the session following the Treasury’s latest quarterly refunding announcement. It revised the Q4 borrowing target by -$10bn to $618bn and estimated Q1 borrowing needs at $800bn, with the latter figure coming at the high end of expectation and serving as a reminder of the United States’ elevated fiscal needs.

Meanwhile, the rally in US equities proved short-lived as chipmaker sentiment deteriorated over the course of the session. Early on, the S&P 500 had traded +1.08% higher, supported by easing geopolitical fears as well as a strong ISM manufacturing print. This saw an unexpected increase to a three-month high of 55.5 in October (vs. 54.5 expected). However, the tech mood then soured, led by a continued slump in the Philly semiconductor index (-3.37%), which also pulled the Nasdaq 100 (-1.39%) down into technical correction territory, with a -10.36% decline from its October 6 peak. While there wasn’t an overt catalyst, emerging expectations of a blue wave in the midterms appeared to weigh on the sector, given the possibility that a Democratic win might create greater hurdles for data center buildout and a push for more AI regulation.

By contrast, the equal-weighted S&P 500 rose +0.73%, as more than two thirds of the index advanced. So that continued the pattern we noted in our October performance review yesterday (see here) of tech losses masking broader equity resilience.

Asian equity markets are mixed this morning as investors assess Apple’s earnings outlook and position for the upcoming US midterm elections. The KOSPI (-3.76%) is the region’s weakest performer but with the Nikkei closed for a holiday. Elsewhere, the Hang Seng (+0.52%) is modestly higher, while the CSI 300 (-0.08%) is little changed and the Shanghai Composite (-0.71%) has edged lower after the PBOC reiterated support measures aimed at strengthening market stability through greater use of stock-market support tools.

Early morning data showed that South Korea's consumer inflation eased in October, rising less than expected on an annual basis, while underlying price pressures remained firm. The consumer price index rose 2.8% from a year earlier, slowing from September's 2.9% increase and below expectations of 2.9%. Core inflation, which excludes volatile food and energy prices, rose 2.8% year-on-year, matching September's pace. The figures come ahead of the Bank of Korea's Nov. 26 policy meeting.

The Reserve Bank of Australia (RBA) raised its cash rate by 25bps to 4.85%, the highest level in 18 years, while warning that further tightening may be needed to combat persistent inflation. The decision was split, with three of the nine board members favouring a pause. The move marks the RBA’s fifth rate hike this year as it continues to grapple with sticky price pressures. In its latest statement, the RBA now expects trimmed mean inflation to remain elevated at 3.6% in December, up from its previous forecast of 3.3%,before easing to 3.5% by mid-2027, compared with 3.0% projected in August. Underlying inflation is now expected to return to the 2.5% midpoint of the target range by June 2028, six months later than previously anticipated. We await the conference.

Looking at the day ahead, the main highlight will be the US midterm elections. Otherwise, US data releases include the JOLTS report of job openings for September, and factory orders for September. From central banks, we’ll hear from the ECB’s Radev, Kocher, Dolenc, Escriva, Moulin, Nagel and Sleijpen.

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