TMGM Daily Market Breakfast: What’s on the Agenda for 26 October 2026?

What Is Shaping Markets This Morning?

• A fall of around 15% in a Tokyo-listed Brazilian equities ETF accompanied Brazilian President Luiz Inácio Lula da Silva’s fourth-term victory with 51.8% of the runoff vote, according to Deutsche Bank.
• Expectations for an October rate increase remained subdued, with federal funds futures assigning just a 10% probability. September’s 25-basis-point increase had taken the target range to 3.75–4.00%.
• Markets leaned towards a December rate increase in Japan: interest-rate swaps assigned a 75% probability to a move to 1.50%, against the Bank of Japan’s current policy rate of 1.25%, according to Brown Brothers Harriman.
• Expectations of a Canadian rate increase this week strengthened to an 85% probability in swaps pricing after September headline inflation hit 3.1%, according to Brown Brothers Harriman.
• Oil gave back ground after President Donald Trump ruled out an immediate strike on Iran, with WTI crude easing towards $100 from its five-month high of $103.28.
• Proposed wider curbs on U.S. investment in China, including biotechnology, faced opposition from Beijing, Bloomberg reported. The proposal came from the U.S. Treasury.
• The resumption of flights announced by Saudi Arabia did not end threats to Riyadh’s King Khalid Airport: Yemen’s Houthis said they would keep attacking it, according to Reuters.
• European trading brought gains of 0.32% for Dow Jones futures and 0.14% for S&P 500 futures, but a 0.13% fall for Nasdaq 100 futures.
• Pressure on gold pushed it through $4,000 to roughly $3,995 during early Asian trading, leaving the metal near its lowest level since July.

Where Are Markets Moving?

How Are U.S. Equity Futures Performing?

Gains in Dow Jones futures reached 0.32%, taking the contract to around 52,560 in Monday’s European trading, while S&P 500 futures added 0.14% to reach approximately 7,670. The Nasdaq 100 contract moved the other way, falling 0.13% to around 29,080.

Why Is Gold Under Pressure?

Gold remained under pressure ahead of the Federal Reserve’s policy meeting, with elevated energy prices and worries over inflation in focus. In Monday’s early Asian session, the metal broke below $4,000 to trade at around $3,995, close to its lowest level since July.

What Does Brazil’s Election Result Mean?

Why Did a Brazilian Equity ETF Slump as Lula Secured a Fourth Term?

After trailing in the first round, Brazilian President Luiz Inácio Lula da Silva secured the presidential runoff with 51.8% of the vote, defeating Flávio Bolsonaro, who received 48.2%. The earlier vote, held three weeks before, had put Lula at 45.1% and Bolsonaro at 47.0%. Deutsche Bank said no first-round runner-up had previously gone on to win since direct presidential elections were restored in Brazil in 1989.

Deutsche Bank reported that Asian trading saw a Tokyo-listed ETF linked to Brazilian equities lose around 15%. Derivatives cited by the bank suggested a roughly 10% fall in the real, although this was an indication rather than a confirmed movement in the spot market.

A more conservative Congress presents a challenge for Lula following the election. According to Deutsche Bank, the first round increased the Senate share held by right- and centre-right parties to 63% from 47%. His pledge to make a fiscal adjustment has not been accompanied by details of how it would be implemented. In the assessments of both Deutsche Bank and Société Générale, Congress’s composition restricts the scope for his legislative programme and fiscal expansion.

An extension of voting hours is the issue behind Bolsonaro’s challenge to the outcome, Société Générale reported. Alongside unresolved concerns over debt, the bank stressed how the changed congressional balance complicates efforts to deliver fiscal consolidation.

What Lies Ahead for Central Banks & the Economy?

Will the Fed Pause in October Following September’s Rate Hike?

Markets saw little prospect of another Federal Reserve increase this week, but had almost fully priced one for the December 9 meeting. Brown Brothers Harriman’s Elias Haddad put the probability implied by federal funds futures for this week’s meeting at 10%. A 25-basis-point increase in September brought the target range to its current 3.75–4.00%.

Several key Fed officials have urged patience, underpinning Haddad’s expectation of no rate change this week. His assessment also drew on October’s composite purchasing managers’ index, which showed vigorous private-sector growth together with a marked rise in selling prices. During the Asian session on Monday, the U.S. Dollar Index slipped.

Does Japan’s 75% December Hike Probability Point to Further Tightening?

Pricing in Japanese interest-rate swaps suggested nearly 75 basis points of tightening over the next 12 months, Brown Brothers Harriman said. It also assigned a 75% probability to a 25-basis-point Bank of Japan increase at the December 18 meeting, which would take the policy rate to 1.50%.

For the upcoming meeting, however, Brown Brothers Harriman’s Elias Haddad forecasts that the BoJ will retain its 1.25% policy rate as it evaluates the 25-basis-point increase delivered in September. Governor Kazuo Ueda said in September that establishing whether 2% inflation had become entrenched could take time, and cautioned that raising rates quickly could disrupt asset prices.

An opening uptick in USD/JPY on Monday proved short-lived as the pair subsequently moved lower. The yen was left trading near its highest level against the dollar in one month.

Will Above-Projection Inflation Prompt a Canadian Rate Increase?

With Canadian interest-rate swaps indicating an 85% probability of a Bank of Canada increase this week, Brown Brothers Harriman strategist Elias Haddad forecasts a 25-basis-point move to 2.50%. According to the bank, this would follow a period of unchanged policy rates dating back to December 2025.

Recent comments from Governor Tiff Macklem warned that “the risk that inflation broadens and becomes more persistent has gone up.” The bank’s third-quarter projection of 2.5% was surpassed by September’s headline consumer inflation reading of 3.1% year on year. Growth also exceeded its projection: second-quarter real GDP rose at an annualised 3.3%, rather than the 2.5% the bank had projected.

By contrast, September’s average CPI trim and median reading, at 1.85% year on year, came in slightly under the central bank’s 2.0% third-quarter projection. Brown Brothers Harriman added that firms’ inflation expectations over one- and two-year horizons had increased.

What Is Driving Energy, Trade Policy & Geopolitical Developments?

Why Is WTI Moving Towards $100 After Trump’s Iran Comments?

Monday saw NYMEX WTI crude futures give up ground from a five-month peak of $103.28 and head towards $100. Oil had traded near $101.10 earlier in the Asian session, after a rise of more than 4% in the preceding session.

According to Al Jazeera, U.S. President Donald Trump rejected immediate military action against Iran on Sunday, stating “there will not be a strike today,”. Several major central banks were also due to announce monetary-policy decisions as oil prices retreated.

Why Is China Challenging Wider U.S. Investment Curbs?

A broader and tougher set of restrictions on U.S. investment in China, including biotechnology, was proposed by the U.S. Treasury and opposed by China. Bloomberg quoted a Chinese official as saying that Beijing “firmly opposes” the proposal.

In the official’s description, the proposed restrictions were discriminatory and “a typical example of an overly broad application of national security concerns.” No final rule had been announced; the measures were still at the proposal stage.

Do Renewed Houthi Threats Put Riyadh Airport Back in Focus?

Hours after Saudi Arabia said flights had resumed despite repeated Houthi attacks, Yemen’s Houthis declared on Sunday that attacks on King Khalid Airport in Riyadh would continue, Reuters reported.

Which Key Events Come Next?

• What Will the Federal Reserve Decide? — Wednesday, 28 October 2026 (United States): The scheduled FOMC announcement will set out its monetary-policy decision.
• What Will the Bank of Japan’s Decision and Outlook Report Show? — Japan: This week’s BoJ schedule includes both a monetary-policy announcement and the Outlook Report.
• Will the Bank of Canada Change Policy? — Canada: A monetary-policy decision from the BoC is scheduled for this week.
• What Is Expected From September PCE Inflation and Third-Quarter GDP? — Thursday, 29 October 2026 (United States): The scheduled releases cover September PCE inflation and third-quarter real GDP. In forecasts cited by Brown Brothers Harriman, headline PCE was expected at 0.5% month on month and 3.6% year on year, up from August’s respective readings of 0.3% and 3.4%. Core PCE was forecast at 0.3% and 3.1%, compared with 0.2% and 3.0%, respectively. The forecast for annualised GDP growth was 3.2%, against 2.2% in the second quarter. Estimates from the Atlanta Fed’s GDPNow and the New York Fed GDP Nowcast were 3.5% and 2.7%, respectively.
• When Is the Announced U.S.–Ukraine–Russia Trilateral Meeting? — United States / Ukraine / Russia: Reuters reported on Sunday that Ukrainian President Volodymyr Zelenskyy had announced a November trilateral meeting involving Kyiv, Washington and Moscow.