AFS Markets Blog: Morning 28/10/2026

• Meanwhile in markets, besides a flood of earnings, there’s little to go on this morning as punters wait for this evening’s FOMC interest rate decision. A hold is locked in, yet US Treasury yields are up 2–3bps across the curve, pushing the 10-year yield back above the 5.00 percent mark;

• In energy, Brent crude is edging higher this morning, trading at $116 a barrel at pixel time. The move comes after a WSJ report that the US is warning Arab allies of a potential short but intense campaign of strikes against Iran once the US midterms are out of the way. There has been plenty of speculation about this option in recent weeks, though it remains to be seen how another round of strikes would change the playing field after so many previous attempts. Israel is reportedly considering joining the campaign against Iran again, having stayed out of direct confrontation in recent months;

• Israel held its parliamentary elections yesterday, with preliminary results delivering the coin-toss outcome the polls pointed to. With half the votes counted, the blocs led by Prime Minister Benjamin Netanyahu and opposition leader Gadi Eisenkot are running neck and neck, each sitting at 51 seats in the 120-seat Knesset. Neither is anywhere near the 61-seat threshold required to govern. The deadlock could still be broken, but none of the options looks particularly appealing: either side could strike an alliance with the Arab parties, the rivals could form a unity government, or Israel could head back to the ballot box for yet another snap election in the near future. In any case, it doesn't seem the results will change the calculus for potentially joining US strikes against Iran;

• Let’s also look ahead to the US midterms, which take place next Tuesday. Behind the scenes, Republicans appear to have given up on retaining control of the House of Representatives, instead focusing their time and money in the home stretch on holding the Senate. Democrats need a net gain of four seats to flip the chamber. While that seemed a long shot just six months ago, favorable headwinds – including historically low approval ratings for President Trump, high oil prices and a relatively weak Republican lineup – have led Polymarket punters to price in a 67 percent chance of a Democratic Senate victory at pixel time. Even so, the race is far from a done deal. With time running short for a final October surprise and Democrats leading in many competitive state-level polls, Republicans remain within the margin of error in most races;

• Crucially, Democrats may need more than a razor-thin 51-seat majority to feel secure. Speculation persists that Democratic Senator John Fetterman could switch to the Republican Party after the midterms. While he has publicly dismissed the idea, party switches are not without precedent, and President Trump recently urged him to cross the aisle. Remember, with a 51-seat majority, Fetterman would hold the decisive vote – and be able to name his price for switching or staying;

• Shifting back to broader markets, Asian equities are in the green this morning, led by South Korea’s Kospi which is up six percent as sentiment around the AI trade improves again. Today’s rise follows a strong set of earnings from memory-chip giant SK Hynix, whose shares are up 10 percent this morning. In FX, EURUSD is trading at the lower end of the 1.11 handle;

• Looking ahead, besides this evening’s FOMC interest rate decision – with a hold the consensus – we also have the Bank of Canada’s decision to look forward to. Like its neighbor to the south, the BOC is expected to hold rates steady this afternoon, with the ECB and BOJ also set to keep rates unchanged later this week.

‍