Oil Falls on Iran Diplomacy as Stocks Steady After Tech Rout
Monday, 2 November 2026 — Oil fell after a report that President Donald Trump wants to give diplomacy with Iran more time before potentially resuming strikes after Tuesday's midterm elections (BBG), and Brent fell 2.9% to $110.16 a barrel (BBG). Asian stocks and US equity futures steadied after last week's slump in technology shares, with Nasdaq 100 futures up 0.8% at 28,771 (BBG). Fitch revised France's outlook to negative on Friday (Yahoo). Chinese regulators will meet banks and brokers to discuss support for the stock market, according to a Cailian report (BBG).
Chart of the day: Watch prices paid in the ISM manufacturing survey
The ISM manufacturing index and its main components since 2016: new orders, production, employment, prices paid and inventories, with the September readings marked. Source: Macrobond, GGMA.
Our four themes for the day:
France: Fitch kept France at A+ on Friday but cut its outlook to negative, citing weaker growth, higher borrowing costs and a wider deficit. It now puts the fiscal adjustment needed to stabilise debt at about 3.5% of GDP, up from 3.0%. The French-German ten-year spread was around 165 basis points before the decision. In our view, an outlook change, rather than a downgrade, could keep the reaction at the open contained, because it does not trigger the rating-based selling a downgrade can. The budget is the risk: the government expects a deficit of 5.4% of output this year and targets 5% next year, and any slippage could bring a downgrade into view.
Second, the ISM and the Fed. The ISM manufacturing index is due at 16:00 CET, with consensus at 54.5, unchanged from September, and prices paid expected to ease to 77.2 from 77.9. Meanwhile, Fed officials kept hikes in play on Friday: St. Louis Fed President Alberto Musalem said further firming will be necessary soon, and Dallas Fed President Lorie Logan wants at least two more quarter-point increases. Short-term interest rate traders price a 73% probability of a December hike, so in our view prices paid matter more than the headline today. Chicago Fed President Austan Goolsbee speaks at 17:15 CET, an hour after the release. We put him more into the hawkish camp, but he is a non-voter.
Over to China. The official manufacturing PMI fell to 49.3 in October from 50.1, below the 49.9 economists expected, and new export orders dropped to 48.7, while the private RatingDog index held at 52.0. The PBOC's answer is stealth easing without the label: its new key rate, the overnight reverse repo at 1.25%, sits below the 1.4% seven-day benchmark it replaces. The seven-day repo rate slipped three basis points to 1.36% this morning. To be sure, the first daily operation drained a net 515 billion yuan, so this is a cheaper anchor rather than a flood of liquidity. Regulators meet banks today on support for stock buybacks, and the CSI 300 rose 1.0% after an 8.5% fall in October.
Then technology shares in Asia. Nasdaq 100 futures rose 0.8% after Friday's 3.5% slump in the index and the 7.2% plunge in the Philadelphia Semiconductor Index, but Asia's chip names split. Kioxia tumbled as much as 17% after a cautious outlook, while South Korean stocks rose after chip exports jumped 259% in October. In our view, demand for chips is intact, and the doubt is about the return on AI spending. S&P Global cut Meta's outlook to negative on its cash-flow deficits, and OpenAI cut its funding target by $10 billion.
In brief
Fitch kept France at A+ but cut its outlook to negative, citing weaker growth, higher borrowing costs and a wider deficit.
Oil fell after a report that Trump wants to give diplomacy with Iran more time before potentially resuming strikes.
Fed officials kept hikes in play before today's ISM factory survey, with St. Louis Fed President Musalem saying more firming will be necessary soon.
China's central bank began daily operations at its new key rate, set below the old benchmark, after factory activity shrank.
South Korea's chip exports rose again in October, extending the boom despite last week's tech rout.
The RBA is expected to raise rates to 4.85% on Tuesday, the highest in 18 years, as house prices keep falling.
Today's Macro Roadmap: The Swiss manufacturing PMI is due at 09:30 CET, the final euro-area PMI follows at 10:00 CET, and the US ISM manufacturing index is out at 16:00 CET. ECB Vice-President Boris Vujčić speaks in Dublin at 10:45 CET, and Chicago Fed President Austan Goolsbee moderates a discussion at 17:15 CET. Apple reports after the US close, and Berkshire Hathaway is expected to report today.
The full briefing
Oil fell after a report that President Donald Trump wants to give diplomacy with Iran more time before potentially resuming strikes after Tuesday's midterm elections (BBG), and Brent fell 2.9% to $110.16 a barrel (BBG). Asian stocks and US equity futures steadied after last week's slump in technology shares, with Nasdaq 100 futures up 0.8% at 28,771 (BBG). Fitch revised France's outlook to negative on Friday (Yahoo). Chinese regulators will meet banks and brokers to discuss support for the stock market, according to a Cailian report (BBG).
Stocks
The Nasdaq 100 slumped 3.5% on Friday, its worst day since June, and the Philadelphia Semiconductor Index plunged 7.2% (BBG). S&P 500 futures rose 0.4% to 7,648, and European futures also rose (BBG). Oaktree co-chair Howard Marks said the recent AI stumbles have made investors more sceptical, which he called "very healthy" (BBG). S&P Global revised Meta's outlook to negative and now forecasts free operating cash-flow deficits of $39 billion in 2026 and $71 billion in 2027 (Reuters). OpenAI cut the target for its latest funding round by $10 billion to about $20 billion, the Financial Times reported (Reuters), and DeepSeek released a prototype coding agent aimed at Anthropic's Claude Code (BBG). Apple reclaimed the title of the world's most valuable company from Nvidia on Friday as investors sought the perceived safety of the iPhone maker (BBG).
Asian equities
Chinese shares led the gains after Cailian reported that the PBOC and two financial regulators will meet major banks on lending programmes to support stock buybacks (BBG). The CSI 300 rose 1.0% to 4,009 after falling 8.5% in October (BBG), and the tech-heavy Star 50 gained 2.8% (BBG). The Hang Seng rose 0.6% to 23,421, and the MSCI Emerging Markets Index rose 1.3% to 1,579. South Korean stocks gained after October exports rose 76.1% on a working-day basis, with chip exports up 259% (BBG). Japanese stocks fell as Kioxia tumbled as much as 17% after a cautious outlook, and Australian shares fell (BBG).
Central banks
St. Louis Fed President Alberto Musalem said on Friday that additional firming will be necessary, and soon (WSJ). Dallas Fed President Lorie Logan said the FOMC needs at least two more 25-basis-point increases at a gradual pace, and Richmond's Tom Barkin also backed a gradual approach (BBG) (Dallasfed) (Investinglive.com). San Francisco Fed President Mary Daly said AI matters for policy in the near and medium term (Investinglive.com). Forecasters expect Friday's payrolls report to show job growth more than doubled in October to 65,000 (BBG).
The RBA is expected to raise its cash rate to 4.85% on Tuesday, the highest in 18 years (WSJ). Australian home prices fell for a seventh month in October (BBG). The Bank of England is expected to raise rates to 4% on Thursday, and officials are weighing whether the neutral rate has risen (BBG) (LS). The BoJ has all but locked in a December hike to 1.5% from 1.25%, Reuters reported (Reuters), after board member Hajime Takata voted for that move on Friday (BoJ). The BoJ will raise its annual ETF sales to ¥860 billion from January (Investing). Bank of Italy Governor Fabio Panetta said further ECB rate increases may become necessary (Banca d'Italia), and chief economist Philip Lane said AI spending is already a significant stimulus to the euro-area economy (ECB). A profile of Klaas Knot, a leading candidate to succeed Christine Lagarde, describes a centrist with a hawkish lean (Substack). RBNZ committee member Carl Hansen said he is "50-50" on a December hike (Interest.co.NZ).
The PBOC conducted 541 billion yuan of overnight reverse repos at 1.25% on Monday, for a net withdrawal of 515 billion yuan (BBG). It was the first regular operation under a framework that makes the overnight rate its main policy anchor, after the PBOC set that rate below the 1.4% seven-day benchmark on Friday (Com). The seven-day repo rate slipped three basis points to 1.36% (BBG), and the weak official PMI fuelled expectations of another PBOC rate cut (BBG).
What's priced for central banks?
Currently, short-term interest rate (STIR) traders price a 73% probability of a Fed rate rise in December and 18 basis points of tightening by then. For the ECB, they price an 80% probability of a rate rise in December, and for the BoJ 20 basis points of tightening by December. They price a 97% probability of a BoE rate rise in November, an 84% probability of an RBA rate rise in November and a 79% probability of an RBNZ rate rise in December.
Currencies
Finance Minister Satsuki Katayama said Japan will act against disorderly currency moves (BBG). The euro rose 0.3% to 1.1188 dollars, while the yen weakened 0.2% to 157.81 per dollar (BBG). The Australian dollar fell 0.2% to 0.7018 dollars before the RBA decision. Trump said the US and Canada have the "concept" of a trade deal, without giving details (InvestingLive). The Canadian dollar was little changed at 1.3983 per US dollar. The Korean won weakened 0.7% to 1,343.31 per dollar, and the offshore yuan firmed 0.1% to 6.6434 per dollar.
Bonds
Treasuries were little changed, with the ten-year yield at 4.93% and the 30-year at 5.30%. Many dealers expect the Treasury to change its issuance guidance at Wednesday's quarterly refunding, possibly paving the way for cuts to long-bond sales in 2027 (BBG). Fitch kept France at A+ but cut its outlook to negative, citing weaker growth, higher borrowing costs and a wider deficit (Yahoo). It now sees the fiscal adjustment needed to stabilise debt at 3.5% of GDP, and the French-German ten-year spread was around 165 basis points on Friday (Yahoo). Japan's ten-year yield was little changed at 2.78%, and China's fell 1.0 basis point to 1.63%.
Commodities
WTI fell 3.2% to $100.80 a barrel (BBG) as Iranian negotiators held a third day of talks with Qatari mediators in Doha on a proposal to reopen the Strait of Hormuz within two days of a deal (GoogleNews). Attacks on shipping continued, with at least 10 incidents across the Gulf, Hormuz and the Gulf of Oman since Saturday (InvestingLive). OPEC+ agreed to keep its output quotas unchanged in December (BBG). A major bank raised its Brent forecast to $105 a barrel for December and $88 for next year, citing supply risks (BBG) (Biggo). The US is backing a resumption of Russian gas sales to Europe through Ukraine as part of talks on an energy ceasefire (WSJ), while Ukraine resumed drone attacks on Russian refineries over the weekend (InvestingLive). Gold rose 0.9% to $3,908 an ounce, recovering from its lowest close in more than a year on Friday (BBG), and copper rose 0.6%.
Crypto
Binance resumed withdrawals in phases and said it has covered 95% of the roughly $6.3 billion stolen in last week's hack (Reuters). TRM Labs and Chainalysis identified North Korea's Lazarus Group as the likely culprit (BBC), and Bitcoin fell below $77,000 on Friday for the first time in more than a month (BBG). It rose for a third day and was up 0.4% at $78,110 this morning (BBG).
Geopolitics
Iran's Supreme Leader Mojtaba Khamenei ordered the military to expand its target lists against the US and Israel (BBG) (Com). Gulf states fear another US-Israeli attack could unleash a more destructive war across the region (BBG). Senior officials from Saudi Arabia, Turkey and Pakistan are travelling to Tehran to head off a strike (BBG), while Secretary of State Marco Rubio said Trump would prefer to end the war peacefully (CNBC).
US politics
More than 48.5 million Americans have voted early before Tuesday's midterms (BBG), and the final New York Times/Siena polls show Democrats ahead in most Senate battlegrounds (Nytimes). The White House has prepared executive actions it could take without Congress if Democrats win it (Reuters), and the Justice Department has filed suits that could extend election disputes (Yahoo).
Corporate news
Westpac's annual net income dipped about 1% to A$6.8 billion, short of estimates, as impairment charges more than doubled (BBG). German engineering workers began warning strikes over a 5% pay demand (Reuters).
Research trade ideas
Mike Wilson at Morgan Stanley said a midterm-related dip in stocks would be a buying opportunity, and sees the S&P 500 at 8,000 after a pullback to about 7,100 (BBG).
Data and the day ahead
Data and the day ahead: On Friday, euro-area GDP grew 0.4% q/q in the third quarter, above the 0.2% consensus, while German inflation slowed to 2.8% y/y from 3.3%, below the 3.0% consensus. The Chicago PMI fell to 55.3 from 58.8, against a consensus of 56. Overnight, Australia's Melbourne Institute inflation gauge rose 0.5% m/m in October after 0.3%, lifting the annual rate to 4.9% (Edu). Australian building approvals rose 5.1% m/m in September, above the 2.0% consensus. Final manufacturing PMIs put Japan at 53.3, a seven-month low, and Australia at 49.6 (InvestingLive). China's private manufacturing PMI was 52.0, matching the consensus, after the official index fell to 49.3 on Saturday (BBG) (Yahoo).
Still to come: the Swiss manufacturing PMI is due at 09:30 CET, with consensus at 55.4 from 55.3, and the final euro-area PMI at 10:00 CET, with consensus at 52.4. The US ISM manufacturing index follows at 16:00 CET, with consensus at 54.5 from 54.5, and prices paid at 77.2 from 77.9 (see our preview here). ECB Vice-President Boris Vujčić speaks in Dublin at 10:45 CET, and Chicago Fed President Austan Goolsbee moderates a discussion at 17:15 CET. Apple reports after the US close, and Berkshire Hathaway is expected to report today.
Time Stamp: 2 November 2026, 08:03 CET
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Related: Our preview: ISM, Fed and ECB Speakers · Friday's Briefing: Tech Selloff Deepens as BoJ Says Its Inflation Target Is Met · Previously on the Fed: Fed Holds With Two Dissents for a Hike as Alphabet… (29 Oct)