OTP Morning Brief: Fed independence and geopolitical tensions in focus
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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.
Western Europe’s and America’s indices edged higher on Monday. The eurozone’s Sentix index for January was better than expected. The turnaround in Hungary’s industrial production is yet to come, November’s weak data suggest. The credit card interest rate cap proposed by President Trump kept the banking sector under pressure. Jerome Powell spoke clearly about the political pressure on the Fed's interest rate policy. President Trump announced 25% tariff on countries doing business with Iran. Gold price exceeded USD 4,600 at one point on Monday. There was no significant movement in the US bond market. Hungary and the USA release inflation data today.
Western Europe’s leading indices ground higher
The leading indices in Western Europe rose moderately on Monday: the STOXX 600 (+0.2%), the DAX (+0.6%), and the FTSE100 (+0.2%) all closed with gains; France’s CAC40 ended almost stagnant. In individual names, Aurubis (+3.1) and Fresnillo (+5.1%), both active in the precious metals industry, did well amid growing gold and silver prices. The STOXX 600 defence sector (+0.5%) extended its seven-day winning streak yesterday. The credit card interest rate cap proposed by Donald Trump weighed on Barclays (-2%), which is active in the US credit card market. Yet the banking sector closed 0.6% higher. Heineken shares slid 4.1% after CEO Dolf van den Brink unexpectedly resigned on Monday. BE Semiconductor Industries soared 7.3% as the chip-making equipment supplier reported better-than-expected fourth-quarter pre-orders. Abivax’ shares jumped 5% on media reports that U.S. pharmaceutical giant Eli Lilly is still interested in buying the French biotech company.
On Monday, the European Commission outlined conditions for China’s electric vehicle manufacturers to avoid EU tariffs via ‘price undertakings’. 0On the whole, China’s Ministry of Commerce welcomed the guidance. On Monday, Volkswagen reported 4.9% contraction in fourth-quarter vehicle sales: while boosting sales in Europe, the German car manufacturer suffered a 17.4% fall in North America and China. In the USA, it was the tariffs and the removal of subsidies for electric cars, while in China it was the extremely intense competition that dragged down Volkswagen's sales. Its share price dropped by 1.2% yesterday. Porsche AG shares slumped more than 5%, amid concerns that the luxury carmaker's current profit estimates may be too high.
In the eurozone, the Sentix index of investor sentiment rose more than expected in January. At -1.8, the indicator reached its highest since July 2025; the improvement was mainly driven by the expectations component. Currently, there is still a strong division between the expectations component (10), which continues to rise in positive territory, and the negative, but also improving, current economic situation component (-13).
In November, Hungary’s industrial production contracted by 2% month on month. This translates into 5.4% year-on-year decline, falling short of analysts’ consensus of -2.2% by a large margin. Thus, a turnaround that could reverse the more-than-three-years-long downtrend is yet to be seen. In the CEE region, Hungary’s BUX (+0.8%) and Poland’s WIG20 (+0.5%) rose, while Czechia’s PX50 shed 0.3%.
US markets posted modest gains
America’s stock indices also showed moderate increases. The S&P 500 and the Dow Jones upped 0.2% each, and the Nasdaq Composite added 0.3%. Walmart shares grew by 3%. Consumer staples increased by 1.4% and led the sector winners. The financial sector was the worst performer of the S&P500’s eleven sectors. Back on Friday, President Trump proposed a 10% cap on credit card interest rates, effective from 20 January. The news weighed on the financial sector: on Monday, JPMorgan (-1.4%), Bank of America (-1.1%), Citigroup (-3%), and Wells Fargo (-1%) all fell. The financial sector is also in the spotlight as the fourth-quarter earnings season begins this week with reports from big banks.
Jerome Powell said on Sunday evening that the Department of Justice has served subpoenas, threatening a criminal indictment related to the cost of renovating the Fed's headquarters in Washington. Jerome Powell was very specific: he called the action a pretext and said the real goal was to exert political pressure on interest rate policy.
In addition to the US action in Venezuela, the wave of protests in Iran, which has been lasting since late December, is also contributing to the increase in global geopolitical tensions. Reportedly, more than 500 people may have been killed during the protests. US President Donald Trump has also raised the possibility of a military strike if the Iranian government uses violence against the protesters. On Monday, he announced an immediate 25% tariff on countries that have business relations with Iran; the details are not yet known.
Amid political and global geopolitical tensions over the independence of the Fed, gold prices rose by 1.9% on Monday, crossing the USD 4,600 level for the first time at one point on Monday. Silver prices jumped by 6.2%. WTI and Brent rose by 0.6-0.8%.
US bond yields barely moved on Monday
Yesterday, the market was uneasy about the criminal indictment against the Fed chairman for the cost overruns of the renovation of the Fed headquarters. Concerns about the Fed’s independence were fuelled by the fact that Fed Chairman Jerome Powell said the reason for the proceedings was President Trump’s dissatisfaction with the Fed's interest rate policy. As a result, the US dollar weakened, sending the EUR/USD to 1.17, and the price of gold went to a new high. US bond yields barely moved; the 10Y yield remained flat below 4.2%. In the euro zone, yields sank by a few basis points, the 10-year German Bund yield eased to 2.8%.
The forint weakened by 0.4%, driving the EUR/HUF above 387, while Hungarian bond yields continued to decline. Yesterday, 3Y and 10Y bond yields sagged by 5-10 basis points, those on longer tenors dipped 3-4 basis points; the 10Y bond yield is drawing near 6.6%. Seeing the adequate demand, the ÁKK accepted bids worth HUF 30 billion at yesterday's switch auction of discount Treasury Bills. Today, the ÁKK auctions 3M discount T-Bills, offering HUF 30 billion.
Today’s highlights
Heading into today’s close, strong growth was seen in Asia. It was partly fuelled by Japan’s Nikkei (+3.3%), which benefited, among other things, from news that the ruling coalition is planning early election, which could ultimately increase its fiscal space. The KOSPI (+1.5%) and the Hang Seng (+0.7%) increased, while the SSEC gave back 0.3%.
Hungary publishes December’s inflation data today. Following the 3.8% headline inflation in November, our in-house forecast is 3% year-on-year price increase for the last month of the year. In the afternoon, the USA will also release December’s inflation data, which are of paramount importance now, as they will show whether the disinflation seen in November's data was real or whether the statistics have been distorted by data collection delays due to the longest government shutdown on record. The USA also publishes new home sales for December and the monthly federal budget balance.
Of the corporate reports, the banking sector is worth paying special attention today, including those from JPMorgan and the Bank of New York.
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