Morning Brew October 13 2026

Good morning.

We enter the key phase of the week on unsteady footing. The main drivers are renewed Middle East escalation, growing nerves around the AI trade and diverging global bond yields.

Middle East — Saudi Arabia and the Iran-backed Houthis are again moving towards a broader conflict, with Riyadh preparing a possible offensive to regain control around the Bab el-Mandeb Strait after renewed Houthi attacks on Saudi territory, oil infrastructure and shipping. The main economic risk is disruption to a vital Red Sea trade route, potentially lifting oil prices, freight rates and insurance costs while adding pressure to Saudi finances and global inflation.

The IMF expects the global economy to achieve real GDP growth above 3% this year, as strong AI investment offsets the energy shock from the Middle East war. However, downside risks are increasing, and more countries are being left vulnerable to rising debt burdens.

Despite a more prolonged conflict that has kept oil above USD 100 per barrel, the IMF forecasts global growth of 3.1% in 2026, slightly above the 3% predicted in July.

The forecast, released as global economic and financial leaders gather in Bangkok for the IMF and World Bank annual meetings, is broadly in line with the most optimistic scenario published in April but below global growth of 3.5% in 2025.

Russia struck at least six energy targets during deadly airstrikes across Ukraine, showing that Moscow had no interest in the energy ceasefire announced by President Donald Trump, according to Ukrainian President Volodymyr Zelenskiy.

Cleveland Fed President Beth Hammack said the central bank should move relatively quickly towards a more restrictive policy stance to fight inflation, which she believes has become more broad-based and is beginning to influence companies’ pricing plans.

Oil — Oil futures rallied after deadly strikes on Riyadh’s international airport over the weekend. The attacks overshadowed the prospect of increased supply after President Donald Trump welcomed fresh Russian diesel exports and discussed a Russia–Ukraine ceasefire covering energy targets. Brent briefly rose above USD 106 per barrel before reversing to around USD 104, down 0.6% on the session. Brent has remained firmly above USD 100 for several weeks, driven by the war with Iran and tanker attacks in the Middle East. Russia’s partial lifting of its diesel export ban provided modest downward pressure.

Asian equities fell sharply as investors questioned the durability of the AI rally, worried about increasing competition and reacted to the widening conflict in the Middle East ahead of the U.S. earnings season.

Investors have ridden the AI wave for the past four years as heavy spending supported corporate profits and economic growth. However, concerns over market concentration and whether the investment will generate returns quickly enough are growing.

The MSCI Asia-Pacific Index excluding Japan fell 2.4% to a two-month low. South Korea’s technology-heavy KOSPI dropped 6%, triggering a five-minute halt in programme trading. Japan’s Nikkei fell 2.6% and Taiwan’s market lost 2%. U.S. chipmakers also declined after reports of rapid technological progress by Chinese rival ChangXin Memory Technologies raised concerns that Chinese companies are closing the technology gap and increasing pressure on AI-related companies in South Korea and Taiwan.

Nvidia — Nvidia’s share of China’s data-centre AI-chip market fell to 34% in the first half of 2026 as U.S. export controls restricted supplies and domestic competitors led by Huawei gained ground, according to IDC data seen by Reuters.

Nvidia shipped 678,000 AI accelerators in China between January and June, down 44% from a year earlier.

US Equities were mixed: The Dow rose 196 points, or 0.4%, to 51,851. The S&P 500 slipped 0.1% to 7,807 and the Nasdaq Composite fell 0.4% to 27,246. Meta gained 3.4% after launching its new Muse AI models, while eBay rose 4% after Morgan Stanley named it a top pick.

European equities rebounded on Monday. The Stoxx 600 rose 0.6% to 636, the FTSE 100 gained 1% to 10,656 and the DAX added 0.8% to 25,277. Banks led the recovery after losing 8% over the previous two weeks amid concerns over France’s fiscal position.

Yields are diverging with the  U.S. 10-year yield falling  below 5.20%. German and Japanese yields are slightly lower, while UK yields are stable and French yields are higher. This has widened the French–German spread to more than 140 basis points.

Japanese  Wholesale prices rose 6.8% year-on-year in September. The pace slowed from the previous month but continued to signal mounting inflation pressure, keeping expectations of a near-term rate increase alive.

The dollar retreated in Asian trading after a holiday in some U.S. markets, while bond yields and oil prices eased alongside a decline in global equities.

The USD Index fell 0.2% to 102.39 after approaching its highest level since April last year. EUR/USD is at 1.1171, USD/JPY at 158.30, GBP/USD at 1.3215 and EUR/CHF at 0.9310.

Commodities and crypto — Gold and silver are near yesterday’s levels after a volatile session, trading at 4,200 and 61. Bitcoin is at 83,600.

Today’s focus is on the major U.S. bank earnings. Please see Charu’s comments below. The Middle East remains in focus, together with any action from the U.S. administration aimed at shifting voter sentiment. The health of the AI trade is also a major concern.

US bank earnings: Can strong profits revive confidence?

• US banks kick off Q3 earnings on 13–14 October, with expectations for healthy profits despite the recent selloff in bank shares.
• Trading activity, interest income and credit quality will be the three key areas to watch.
• Earnings beats could help sentiment recover, but rising bond yields and cautious management guidance remain risks.

Tuesday, 13 October 2026
Macro: Reserve Bank of Australia meeting minutes.
Corporate earnings: 12:00 CET JPMorgan Chase, 12:30 CET  Goldman Sachs, Wells Fargo, 13:00 CET  Citigroup, UnitedHealth, Johnson & Johnson and Domino’s Pizza.

Wednesday, 14 October 2026
Macro: China CPI and PPI; U.S. CPI.
Corporate earnings: ASML, Bank of America, Morgan Stanley, BlackRock, State Street and Fastenal.

Thursday, 15 October 2026
Macro: Australia employment report; U.S. PPI, retail sales and initial jobless claims.
Corporate earnings: Taiwan Semiconductor Manufacturing, Charles Schwab, Prologis, U.S. Bancorp, PNC Financial Services, Infosys and Wipro.

Friday, 16 October 2026
Macro: Euro-area final inflation; U.S. industrial production.
Corporate earnings: Truist Financial, M&T Bank, Regions Financial, Citizens Financial, Travelers, HDFC Bank, Danske Bank, SKF, Swedbank, Telia and Yara International.