Morning Brew October 7 2026

Good morning.

Oil prices are moving higher again as falling inventories, a looming hurricane and renewed fighting in the Middle East revive supply concerns. In Asian trading, WTI gained 0.9% to USD 90.22 per barrel, while Brent rose 1.0% to USD 101.58.

U.S. equities had closed higher on Tuesday as crude prices stabilised and Treasury yields eased, offering some relief from the concerns that have dominated recent weeks. Attention is now turning to the approaching third-quarter earnings season.

The broad rally pushed the S&P 500 and Nasdaq to record closing highs. The Dow remains just over 5% below its record closing high reached on 5 August. Marvell Technology gained 5.8% after presenting its 2028 revenue forecast, while AMD rose 2.8% after Chief Executive Lisa Su said the company plans to increase chip supply substantially in 2027 to meet strong AI demand. Constellation Energy jumped 12.3% after Alphabet signed a 3,590-megawatt power agreement with the company.

The U.S. trade deficit widened by 13.7% as imports climbed to a record high. Imports increased 4.3% month-on-month and 28.4% year-on-year, reflecting robust domestic demand but also adding to inflation concerns amid war-related supply constraints.

Middle East risks remain elevated. Attacks by Yemen’s Houthi rebels damaged two airports in southern Saudi Arabia near the border with Yemen, marking the latest escalation in fighting that threatens global energy markets. The attacks followed a counteroffensive by Saudi Arabia and its allies in Yemen aimed at retaking territory along the Red Sea. The Houthi presence along the coast and near the Bab al-Mandeb Strait threatens to tighten regional oil supplies further.

Gold slipped as the dollar strengthened, while investors waited for the minutes of the Federal Reserve’s September meeting for clues on whether policymakers remain inclined to tighten policy further.  Spot gold fell 0.6% to USD 4,138, while silver is trading at 60.75.

The euro gave back part of Tuesday’s gains, when French bonds rallied after the frontrunner in next spring’s presidential election outlined plans to cut spending. French Finance Minister Roland Lescure said he remains open to negotiation but will do “whatever it takes” to pass the budget. The yen weakened even after a dovish Bank of Japan board member said she would support further rate increases.

EUR/USD is at 1.1230, USD/JPY at 158.35 and GBP/USD at 1.3250. The Swiss franc is trading at 0.9356 against the euro and 0.8330 against the U.S. dollar.

Yields remain high with the US 10`s at 5.31, the UK 5.38, France 4.75, Germany 3.5, Japan 3.1 and Switzerland 0.51

The Federal Reserve minutes are today’s main scheduled event. The account of the September meeting, when policymakers raised rates to contain inflation, will be scrutinised for the path ahead. Recent Fed comments have sounded less hawkish following softer-than-expected personal consumption expenditure inflation and employment data.

Headlines:  HSBC is planning broad job cuts across its UK wealth-management business, including a sharp reduction in financial advisers and specialist staff, as part of a wider push to integrate AI.

SpaceX plans to raise USD 40 billion in a financing round led by asset manager Apollo Global Management to purchase Nvidia AI chips.

Samsung Electronics is expected to report an almost ninefold increase in third-quarter operating profit, supported by strong AI demand, although analysts have lowered their forecasts by nearly 8% since the end of August.

The Reserve Bank of India raised its benchmark repo rate by 25 basis points to 5.5%, its first increase in almost four years, as inflation pressures build alongside strong economic growth.

Bottom line: Equities continue to look through a worrying mix of geopolitical and macro headlines. The third-quarter earnings season is likely to be the next major test, alongside renewed inflation pressure from the Middle East conflict, heavy AI spending and elevated bond yields.

Charu took a look at the looming earning season: What is different about this earnings season?

• Expectations are already high. S&P 500 earnings are expected to rise around 29.5% year-on-year, and analysts have actually raised estimates going into the reporting season. A routine earnings beat may therefore carry less weight than usual.
• Valuations face a tougher test when bond yields are high. The US 10-year Treasury yield has recently traded above 5.3%, raising the return hurdle for equities and putting greater pressure on stocks where a lot of future growth is already priced in.
• Earnings quality and balance sheets matter more. Investors may increasingly distinguish between companies that can turn growth into cash and finance the next phase of investment internally, and those that need ever more capital to keep the growth story alive.