OTP Morning Brief: The ECB may raise its growth forecast
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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 stock indices closed higher on Monday. The ECB may raise its growth forecast further, its president indicated. European defence stocks fell yesterday. The Eurozone’s industrial production grew as expected. Wall Street's leading indices were dragged down by AI stocks. The Empire State manufacturing index fell sharper than expected. Developed markets’ long-term yields sank. The USD weakened against the EUR, the HUF strengthened slightly. Today, the focus is on the official US employment and retail sales data for November, European PMIs and the MNB's interest rate decision.
Europe’s stock indices closed higher on Monday; the ECB may raise its growth outlook again, president Lagarde indicated; Europe’s defence shares fell; the eurozone’s industrial production grew as expected
In Europe, the stock markets closed higher on Tuesday. In a statement ahead of Thursday’s policy decision of the ECB, Christine Lagarde indicated that the European Central Bank may lift its growth forecast further in December. The ECB is expected to leave its interest rate at 2% on Thursday. The Bank of England will also make rate decision on Thursday, where the market expects a cut, albeit in a tight vote. Despite the benign sentiment on stock markets, the shares of many European defence companies subsided after Volodymyr Zelensky had suggested that Ukraine was ready to abandon its NATO accession plans. Rheinmetall descended by 2.6% and Renk dropped by 1.6%.
The eurozone’s industrial production rose by 0.8% month-on-month in October, in line with market expectations, in the biggest increase since May 2025, after a 0.2% uptick in the previous month. Growth was broad-based, powered by durable goods (+2.0%), non-durable goods (+1.2%), energy (+1.1%), capital goods (+0.5%) and semi-finished goods (+0.3%). Among the largest economies of the eurozone, production rose in Germany (+1.4%), Ireland (+4.0%), Spain (+0.9%), the Netherlands (+0.3%), and France (+0.2%), while it fell in Italy (-1.0%). In annual terms, industrial production grew by 2.0% in October, to a five-month high, up from 1.2% in September.
The CEE region’s main indices moved mixed on Monday: the BUX sank, but the Prague and Warsaw indices rose. Of the BUX’s four blue chips, only Richter achieved gain, while OTP closed flat, and the other two declined.
Wall Street's major indexes were dragged down by AI stocks; the Empire State Manufacturing Index fell sharper than thought
US indexes fell yesterday. The weakness was mainly due to the decline in AI-related stocks. Broadcom plunged 5.6% and Oracle lost 2.7% as investors sought sectors that are more exposed to the economic cycle, such as consumer goods and industrials, and demand for healthcare stocks also increased. Last week already portended that trend; the S&P500 and the Nasdaq weakened, while the Dow rose, thanks to its lower exposure to technology. Market analysts opines that AI-related companies are currently under pressure, but the Magnificent Seven may remain dominant, owing to their strong balance sheets and future profit prospects.
The Empire State Manufacturing Index slid to -3.9 in December from a one-year high of 18.7 in November, missing expectations for a 10-point increase, and reversing a two-month expansion. New orders remained stable, and the Inventories index came in at 4.0, suggesting a modest build-up in inventories. Delivery times have shortened, Unfilled Orders dropped, and Supply Availability deteriorated. The Number of Employees component nudged higher, as did the Average Employee Workweek. The pace of increases in both input price and selling price moderated but remained elevated. The forward-looking indicator of general business conditions rose by 17 points, to almost a one-year high, suggesting that companies are more optimistic about improving conditions over the next six months.
Developed markets’ long-term yields sank; the USD weakened vs the EUR, the HUF strengthened a bit
Along with the continued decline in AI stocks, US long-term yields sank slightly. In Europe, the German 10-year government bond yield declined minimally, by one basis point, despite the ECB's more optimistic growth outlook. The euro’s appreciation against the dollar continued: the pair traded above 1.175 yesterday. Meanwhile, the forint regained some of its strength before today's policy decision of the MNB; the EUR/HUF closed below 385.
In Hungary, yields on long-term bonds nudged higher; the 10Y bond yield closed just one basis point shy of 7%.
Today’s highlights
Asia’s markets headed down in today’s trading. The shares of Korea Zinc slumped more than 13% after the company reportedly agreed to sell USD 1.9 billion worth of shares to a joint venture controlled by the US government and unnamed US strategic investors.
Today’s important publications include PMIs from Europe, the ZEW index from Germany, and the unemployment rate from the UK. The USA releases retail sales and PMIs, along with official employment data for November, which was delayed owing to the government shutdown.
In Hungary, the MNB makes rate decision today. The ÁKK auctions HUF 20 billion worth of discount Treasury bills maturing in April 2026.
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