OTP Morning Brief: The ECB may raise its growth forecast
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OTP Morning Brief: Thursday trading brings equity market correction and rising oil prices
European equities closed slightly lower, primarily due to weakness in the technology and defence sectors. A more significant correction unfolded on US equities markets as a wave of selling hit technology stocks, while oil and natural gas prices rose markedly amid escalating geopolitical tensions. Amid growing investor caution, both US and German government bond yields declined, while the dollar edged higher against the euro after experiencing significant intraday volatility. Longer-dated yields also declined on the Hungarian bond market, while the forint weakened against both the euro and the dollar. The negative sentiment spilled over from US markets into Asia, with most major Asian equity indices trading in negative territory during the morning session. Today's focus will be on the October US labour market data, which could materially influence market expectations regarding the Federal Reserve's December rate decision. Additionally, retail sales data will be released from both the euro area and Hungary, while Germany will publish its September industrial production figures.
OTP Morning Brief: Investor sentiment improved following the Democrats’ congressional victory and the decline in oil prices
Lower bond yields and oil prices, driven by the Democrats’ expected congressional majority, improved market sentiment. Brent crude has fallen by roughly 20% since the beginning of the week, while the yield on the 10-year US Treasury note declined by 6 basis points to 4.89%. Amid the favourable risk environment, the US dollar weakened, with the EUR/USD exchange rate rising to near 1.123. In Europe, positive corporate news also supported market sentiment, with the STOXX 600 index rising by 1.8%, while shares of Novo Nordisk gained 5.6% after the company raised its full-year guidance. Today, investors will focus on German industrial orders, French industrial production and the euro area producer price index, alongside interest rate decisions by the Bank of England and the Czech central bank. In the US, weekly initial jobless claims, as well as Q3 productivity and labour cost data, will also be in the spotlight.
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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