OTP Morning Brief: Despite rising oil prices, bond yields sank on Tuesday
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OTP Morning Brief: The S&P pulled back from its record high on Friday, but ended the week in positive territory
European stocks closed slightly lower on Friday, snapping a four-week winning streak. The BUX presented a much more positive picture in terms of its weekly performance. The eurozone economy expanded by 0.4% quarter-on-quarter in Q2, supported by Spain’s outstanding performance. Major US indices also closed lower on Friday, but the week was largely positive overall. Investor sentiment continued to be weighed down by uncertainty in the Middle East and elevated oil prices. US Treasury yields rose and the dollar weakened following weaker-than-expected retail sales data. Japan's Q2 GDP growth fell short of expectations, while Asian equity markets moved higher. August purchasing managers' indices are due for release this week.
OTP Morning Brief: US rate cut expectations declined further despite the favorable producer price index data
The favorable July producer price index data led to a further decline in US rate cut expectations on Thursday. Markets are now pricing in a Fed rate cut only in December. Declining rate cut expectations provided a boost to US equities, with the technology-heavy Nasdaq posting the strongest gains among the major indices. Sandisk shares surged 13.7%. In Europe, major stock indices moved only modestly, with the STOXX 600 remaining broadly flat. The favorable US CPI data led to a decline in developed market government bond yields. Today, the second estimate of eurozone Q2 GDP is due for release, while additional July retail sales data will be published in the US.
Western Europe’s stock markets saw calm trading session on Tuesday. Germany’s ZEW economic sentiment index was unexpectedly weak. US stock indices climbed higher. Iran attacked energy facilities in the United Arab Emirates. Oil prices rebounded 3%. Developed economies’ bond yields declined. Markets are almost certain that the Fed will keep interest rates on hold today. Investors will closely watch the Fed's updated forecasts, which may also reflect the conflict in the Middle East.
Western Europe’s stock markets continued calm trading
In Western Europe, stock indices extended their gains on Tuesday. Investors await today's rate decision of the Fed and Thursday's meetings of the European Central Bank and the Bank of Japan, as well as their updated guidance amid the Middle East conflict. The STOXX 600 and Germany’s DAX (+0.7% each), the CAC40 (+0.5%), and the UK’s FTSE100 (+0.8%) all made it higher yesterday. The STOXX 600 energy sector index grew by 2.3%, hand in hand with rising oil prices. The Strait of Hormuz remained largely closed and there is still no clear information on when it may reopen to commercial shipments. A defensive sector, utilities added 1.6%. In individual stocks, Springer Nature skyrocketed 12.8% as the German publisher forecast a better-than-expected 2026 year. Sartorius Stedim Biotech jumped by 8.9% after announcing new medium-term growth targets; its German parent, Sartorius, shot up 8.2%. Fraport advanced 5.9% as the airport operator forecast slightly higher earnings for 2026.
Germany’s ZEW economic sentiment index practically collapsed in March: it came in at -0.5, down from 58.3 in February, and missing the consensus forecast of 39 by a large margin. The negative reading clearly reflects the war in Iran, including its impact on energy prices and inflation. Meanwhile, Deutsche Bank cut its 2026 growth forecast for Germany from 1.5% to 1.0%.
Yesterday, the BUX started to make up for Monday's loss with a 1.45% gain. Of its blue chips, OTP (+2.9%) was top gainer. Elsewhere in the CEE region, Poland’s WIG20 and Czechia’s PX50 grew by 2.1% each.
The price of TTF natural gas increased by 1.7% yesterday.
US stock indices rose moderately
Wall Street’s indices continued to rise on Tuesday, albeit slower than on Monday. The S&P500 (+0.2%), the Dow Jones (+0.1%), and the Nasdaq Composite (+0.5%) all climbed higher. Airline and travel stocks rebounded from the losses made in recent weeks owing U.S. and Israeli strikes on Iran and a surge in energy prices. Delta Air Lines (+6.5%), American Airlines Group (+3.5%), and United Airlines (+3.2%) all took off yesterday. Uber advanced 4.2% after announcing that it would launch robotaxis in 28 cities, using Nvidia's self-driving software next year. The S&P500 financials sector gained 0.5% yesterday, emerging from last week’s plunge, which was partly caused by concerns about private credit quality. The energy (+1%) and the consumer discretionary (+1%) sectors were top gainers. Eli Lilly shrank nearly 6% after HSBC downgraded the pharma stock from Hold to Reduce, and cut its price target to USD 850, from USD 1,070.
President Donald Trump said on Tuesday that, because of the war in Iran, he would postpone his March 31-April 2 visit to Beijing, where he was to meet Chinese President Xi Jinping. Iran has renewed its attacks on energy facilities in the United Arab Emirates. Oil loading partially halted on Tuesday at the port of Fujairah, UAE, following an attack on an export terminal. Fujairah is on the outer side of the Strait of Hormuz and is one of the few ports from which oil from the region can be exported by bypassing the blockaded strait. Donald Trump’s call for allies to provide military support to keep the strait open has fallen on deaf ears. After Monday's decline, oil prices rebounded 3% on Tuesday.
Advanced economies’ bond yields declined
Although oil prices bounced back 3% yesterday, bond and currency markets ignore did not really reflect this change. Developed markets’ bond yields sank, the least of which was the 10-year US yield’s easing by one basis point, to 4.2%. In the eurozone’s major economies, yields shed about five basis points, moving even further away from previous peaks. Germany’s 10-year Bund yield is at 2.9%. The dollar weakened against the euro, pushing the EUR/USD back to near 1.155.
In the CEE region, the koruna (CZK, 0.1%), the zloty (PLN, 0.2%), and the forint (HUF, 0.4%) all appreciated against the euro, so the EUR/HUF dropped below 389. Hungary’s bond yields sank by around 10 basis points; the 10Y yield slipped below 7.15%.
On Tuesday, Hungary’s ÁKK sold 3M discount Treasury Bills worth HUF 32 billion with adequate demand, at an average yield of 6.16%.
Today’s highlights
In Asia, Japan’s and Korea’s markets were seen growing in the last hour of trading, mainly due to the morning's drop in oil prices. Oil prices are easing on positive news about the possibility of alternative oil exports from Iraq; petroleum may reach the port of Ceyhan in Turkey via a pipeline. Japan’s Nikkei (+2.7%) Korea’s KOSPI (+4.7%), Hong Kong’s Hang Seng (+0.7%) were seen rising, while the SSEC was slightly down today.
Today the Fed holds its penultimate interest rate decision meeting under Jerome Powell’s chairmanship. Market prices reflect almost 100% probability of leaving fed funds rate at 3.5-3.75%. The main questions are what figures the updated forecast will print, and how the FOMC (Fed Open Market Committee) assesses the risks of the Middle East conflict, in addition to the latest inflation and labour market data. Separately, the USA will release the producer price index for February and factory orders for January.
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