OTP Morning Brief: Defence stocks surged and oil prices have picked up
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OTP Morning Brief: Crude oil prices plunged sharply as the Middle East conflict eased
The first trading day of the week brought modest gains to the major European stock markets, as sectors benefiting from the easing of the Middle East conflict offset declines in the technology and energy sectors. Stock markets across the CEE region also moved higher, with the BUX gaining 0.7%. Wall Street indices closed mixed with minor moves, as investors turned their attention to the Fed's upcoming interest rate decision later this week and earnings reports from major technology companies. WTI crude futures fell by more than 7%, while Brent crude declined by over 8%. Developed-market bond yields declined as easing concerns over CPI, driven by lower oil prices, boosted demand for fixed-income assets. Domestic long-term bond yields also moved markedly lower. The EURHUF exchange rate is trading around the 360 level. Today marks the start of the Fed's two-day rate-setting meeting, while the earnings season continues with reports from several major companies.
OTP Morning Brief: Airstrikes eased in the Middle East
European indices advanced on Friday, allowing them to end the week in positive territory once again. The July PMI data painted a positive picture of the eurozone outlook, although Trump imposed new tariffs, including measures affecting Europe. The BUX declined on Friday, but still ended the week in positive territory. According to the HCSO, employment declined while unemployment increased. Airstrikes between Iran and neighboring countries eased over the weekend. This pushed oil prices back below $100 per barrel. The S&P declined on Friday and posted a loss for the week as a whole. The composite PMI also increased in the US. Developed market government bond yields retreated from their local highs. Hungarian bond yields increased, while the forint strengthened slightly. Q2 GDP data will be released this week for Hungary, the eurozone, and the US. In addition, investors will be watching eurozone and US CPI data, as well as the Fed's interest rate decision.
Europe’s key stock markets ended mixed on Thursday. German factory orders saw strong growth while the eurozone economic sentiment indicator has weakened. The unemployment rate fell to 6.3%, while producer prices rose stronger than expected. Oil prices have picked up. Major US indices closed mixed yesterday, defence and auto stocks rose. Unit labour costs fell in non-farm sectors but rose in manufacturing. US jobless claims data still point to a tight labour market. Yields rose on both sides of the Atlantic; the EUR/HUF is above 385. Today, the focus will be on US non-farm payrolls for December, while Europe releases industrial, retail sales and exports data.
Europe’s key stock markets ended mixed on Thursday. German factory orders saw strong growth while the eurozone economic sentiment indicator has weakened, the unemployment rate fell to 6.3%, while producer prices rose stronger than expected
In Europe, stock markets posted modest losses on Thursday, when the Stoxx 600 index inched down 0.2%, as its sectors performed mixed. The defence sector rose for the fifth day in a row as Donald Trump’s social media post on Wednesday urged a USD 500 billion (+50%) increase in U.S. defence spending by 2027. In Europe, the defence sector index rose by 1.1%, Leonardo grew by 2%, while Rheinmetall closed 1.4% higher. In contrast, oil stocks weakened following the previous days’ drop in oil prices: Shell (-3.5%) and BP (-0.6%) both slumped in European trading.
Europe’s macroeconomic data painted a mixed picture. Exceeding expectations for a 1% decline by a large margin, Germany’s industrial orders surged by 5.6% month-on-month in November, largely driven by demand for metal products and high-value transport equipment. Excluding large-volume orders, the growth rate was 0.7%. In contrast, the eurozone’s economic sentiment indicator fell to 96.7 points in December, missing market expectations for 97. Services, retail, and consumer confidence all weakened, while inflation expectations rose again. The unemployment rate fell to 6.3%, the lowest level since April, while there was also a slight improvement among young people. Producer prices increased by 0.5% month-on-month in November, beating market expectations of 0.2%, driven mainly by energy prices. However, producer prices continued to decline by 1.7% year-on-year.
The CEE region’s indices moved mixed: the Warsaw and Budapest indices fell, while the one in Prague managed to rise. Of Hungary’s blue chips, Mol and OTP both subsided from Wednesday’s highs, but the other two achieved gains.
America’s major indices closed mixed; defence and auto stocks rose. Oil prices picked up. Unit labour costs fell in non-farm sectors but rose in manufacturing. US jobless claims data still point to a tight labour market
US stock markets closed mixed on Thursday. The IT sector (-2%) was the only significant loser as large AI-related stocks were dumped: Nvidia (-2%), Oracle (-1.6%), and Apple (-0.5%) all fell yesterday. But defence stocks did well after Donald Trump's post: Lockheed Martin took off 4%, Northrop Grumman soared 3%, and Kratos Defence jumped more than 14%. US auto stocks rose after the announcement of Donald Trump's programme, which provides a tax refund of up to 10,000 USD/year for the interest on loans for new cars made in the US between 2025 and 2028. Ford (+4.8%) and General Motors (+3.9%) revved up on the news. Oil prices have picked up: Brent and WTI both added more than 3%, ending the fall that was triggered by news of America’s access to Venezuelan oil. With the support of five Republicans, the US Senate unexpectedly passed a resolution on Thursday that would prohibit Donald Trump from taking further military action against Venezuela without authorization from Congress. Although the resolution is not yet final, the result of the vote is indicative.
US data pointed to strong productivity improvement and unexpectedly low cost pressures: non-farm business unit labour costs fell 1.9% in the third quarter, whereas 1.0% increase was expected, while productivity jumped by 4.9% (forecast: 3%), outpacing wage growth (+2.9%). Productivity showed the strongest growth rate since the third quarter of 2023. In the manufacturing sector, however, unit labour costs rose 1.5%, while productivity (+3.3%) and wages (+4.8%) increased. Initial jobless claims rose to 208,000 in early January, slightly missing expectations of 210,000, while the continuing claims rose to 1.914 million, beating forecasts of 1.9 million, suggesting that the labour market is a still tight but slowing.
Yields rose on both sides of the Atlantic; the EUR/HUF is above 385
On Thursday, bond yields rose in both Europe and the US as recession fears have eased. Reasons include the unexpectedly strong industrial orders data from German, and the eurozone’s unemployment rate falling to a historic low. In the USA, layoffs fell to a 17-month low and initial jobless claims remained subdued last week. The US (+4.5bps) and German (+2bps) 10-year yields both rose, the former drew near 4.2% and the latter exceeded 2.8%. The dollar strengthened by 0.2% against the euro, thus the EUR/USD traded around 1.165.
The CEE region’s currencies were not doing well yesterday: the zloty (PLN), the Czech koruna (CZK) and forint (HUF) all weakened. The EUR/HUF closed above 385. The decline in Hungarian bond yields has stopped: most reference yields inched up 1-2 basis points; the 10Y one is still hovering at a nearly one-year low of around 6.7%. Yesterday, the ÁKK auctioned 3Y, 5Y, and 10Y fixed-rate bonds, as well as 10-year floaters. Demand for fixed-rate bonds was strong: bids for the three maturities surpassed HUF 250 billion, and the ÁKK accepted more than HUF 110 billion worth of them, with average yields typically in line with Wednesday's lows. Bids for the floating-rate bond surpassed HUF 350 billion, of which the debt manager accepted nearly HUF 200 billion.
Today’s highlights
Asia’s stock markets traded mixed this morning: defence stocks also rose in Asia, following the events in Venezuela. In China, December inflation came in at 0.8%, as expected.
Today, the USA publishes employment and earnings data, as well as the University of Michigan's consumer sentiment index. In Europe, industrial data from Germany and France, Germany’s exports statistics, as well as the eurozone’s and Hungary’s retail sales figures are scheduled for release.
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