Daily Financial Breakfast 26 October 2026: Deutsche Bank Says Lula Wins Brazil Runoff While Trump Rules Out Sunday Iran Strike

Market News Today: Key Takeaways

• Deutsche Bank and Societe Generale reported that Lula won Brazil's presidential runoff with 51.8% against Flávio Bolsonaro's 48.2%, securing a fourth term.
• President Donald Trump ruled out a Sunday strike on Iran, while WTI crude retreated toward $100 a barrel on Monday from a five-month high of $103.28.
• China opposed a U.S. Treasury proposal to expand restrictions on U.S. investment in China, including biotechnology, Bloomberg reported.
• Yemen's Houthis said they would continue attacking Riyadh's King Khalid Airport after Saudi Arabia announced that flights had resumed, Reuters reported.
• Brown Brothers Harriman expects the Federal Reserve to hold its target range at 3.75–4.00%, with futures pricing only a 10% chance of an increase this week.
• Brown Brothers Harriman expects the Bank of Japan to hold its policy rate at 1.25%, while swaps priced a 75% probability of a December increase to 1.50%.
• Brown Brothers Harriman expects the Bank of Canada to raise its policy rate by 25 basis points to 2.50%, with swaps pricing an 85% probability of an increase this week.

Market Developments

U.S. Equity Futures

During European trading on Monday, Dow Jones futures rose 0.32% to around 52,560 and S&P 500 futures gained 0.14% to around 7,670. Nasdaq 100 futures declined 0.13% to around 29,080.

Foreign Exchange

The U.S. Dollar Index lost ground during Asian trading on Monday. NZD/USD advanced to around 0.5700 in the early Asian session, while AUD/USD declined to around 0.7030. USD/JPY attracted fresh selling after an early uptick. Later, GBP/JPY posted modest gains as the yen underperformed, although the pair remained largely range-bound.

Gold

Gold declined below $4,000 to around $3,995 during early Asian trading on Monday, remaining near its lowest level since July.

Government Policy & Geopolitics

Deutsche Bank Says Lula Wins Brazil Runoff With 51.8%

Lula secured a fourth presidential term by defeating Flávio Bolsonaro 51.8% to 48.2%, Deutsche Bank and Societe Generale reported. He overturned a first-round deficit of 45.1% to 47.0% three weeks earlier. Deutsche Bank described the outcome as the first victory by a first-round runner-up since Brazil returned to direct presidential elections in 1989.

A Tokyo-listed exchange-traded fund tracking Brazilian equities fell around 15% in Asian trading, according to Deutsche Bank. The bank also said derivatives indicated a roughly 10% decline in the real; that indication was not a reported spot-market move.

The election left Lula facing a more conservative Congress. Right- and centre-right parties increased their Senate share from 47% to 63% in the first round, Deutsche Bank said. Lula has promised a fiscal adjustment without specifying how it would be delivered, while both banks said the congressional shift would constrain his administration's agenda and fiscal expansion.

Societe Generale said Bolsonaro was challenging the result over the extension of voting hours. Its economists projected gradual fiscal consolidation and a shallower monetary-easing cycle, with the Selic rate ending 2027 at 12.25% and remaining above market expectations through 2028.

Trump Rules Out Sunday Iran Strike as WTI Retreats Toward $100

U.S. President Donald Trump ruled out military action against Iran on Sunday, saying “there will not be a strike today,” Aljazeera reported. His statement applied to that day and did not announce a broader agreement on the confrontation.

WTI crude traded around $101.10 a barrel during Asian hours on Monday before retreating toward $100 later in the reporting period. NYMEX futures had reached a five-month high of $103.28, following gains of more than 4% in the previous trading session.

China Opposes Proposed Expansion of U.S. Investment Restrictions

A Chinese official said Beijing “firmly opposes” a U.S. Treasury proposal to broaden and strengthen restrictions on U.S. investment in China, including biotechnology, Bloomberg reported. The official called the proposal discriminatory and “a typical example of an overly broad application of national security concerns.” The measures remained a proposal rather than an announced final rule.

Houthis Say Attacks on Riyadh Airport Will Continue

Yemen's Houthis said on Sunday that they would continue attacking Saudi Arabia's King Khalid Airport in Riyadh, Reuters reported. The statement came hours after the kingdom announced that flights had resumed despite repeated attacks, placing the airport's operations at the centre of the latest security developments.

Central Banks & Economic Data

BBH Expects Fed to Hold Rates at 3.75–4.00%

Brown Brothers Harriman's Elias Haddad expects the Federal Reserve to leave its target range unchanged at 3.75–4.00%, following September's 25-basis-point increase. He cited calls for patience from several key Fed officials. Futures priced only a 10% probability of an increase this week, while a December 9 increase was virtually fully priced, according to BBH.

BBH pointed to continued private-sector expansion in the October composite PMI and a sharp increase in selling prices. Its forecasts put third-quarter annualized GDP growth at 3.2%, compared with 2.2% in the second quarter, driven by consumer spending and AI-related business investment. The Atlanta Fed's GDPNow and New York Fed's GDP Nowcast estimates stood at 3.5% and 2.7%, respectively.

For September PCE inflation, BBH projected a headline increase of 0.5% month on month and 3.6% year on year, compared with August's 0.3% and 3.4%. It forecast core PCE increases of 0.3% monthly and 3.1% annually, versus 0.2% and 3.0% in August. These figures were forecasts, not released September readings.

BBH Expects Bank of Japan to Hold at 1.25%

Brown Brothers Harriman's Elias Haddad expects the Bank of Japan to retain its 1.25% policy rate while assessing September's 25-basis-point increase. In September, Governor Kazuo Ueda warned that rapid increases could unsettle asset prices and said confirming that 2% inflation was entrenched could take time.

The swaps curve priced a 75% probability of a 25-basis-point increase to 1.50% at the December 18 meeting, together with nearly 75 basis points of tightening over the next twelve months, according to BBH.

BBH Expects Bank of Canada to Raise Rates to 2.50%

Brown Brothers Harriman's Elias Haddad expects the Bank of Canada to begin a new tightening cycle with a 25-basis-point increase to 2.50%, after holding rates steady since December 2025. Swaps priced an 85% probability of an increase this week. Governor Tiff Macklem recently warned that “the risk that inflation broadens and becomes more persistent has gone up.”

September headline inflation was 3.1% year on year, above the bank's 2.5% third-quarter projection. Second-quarter GDP grew at a 3.3% annualized rate, compared with its 2.5% projection. The average of CPI trim and median was 1.85% in September, just below the bank's 2.0% third-quarter projection.

BBH also cited higher one- and two-year inflation expectations among firms and anticipated upward revisions to the central bank's inflation and real GDP forecasts.

Upcoming Key Events

• Federal Reserve Policy Decision (28 October 2026): United States: The Federal Reserve is scheduled to announce its monetary policy decision on Wednesday.
• September PCE Inflation (29 October 2026): United States: September headline and core Personal Consumption Expenditures inflation data are scheduled for release on Thursday.
• Third-Quarter GDP (29 October 2026): United States: Third-quarter real GDP data are scheduled for release on Thursday.
• Bank of Japan Policy Announcement: Japan: The Bank of Japan's monetary policy announcement is scheduled for this week.
• Bank of Canada Policy Decision: Canada: The Bank of Canada's policy decision is due this week.
• UK Budget: United Kingdom: The government's Budget announcement is scheduled for this week.
• U.S.–Ukraine–Russia Trilateral Meeting: United States, Ukraine and Russia: Ukrainian President Volodymyr Zelenskyy said a trilateral meeting would take place in November, Reuters reported on Sunday.