OTP Morning Brief: Europe’s stock markets closed at new highs
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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 closed at newhighs; so did Richter’s share in Budapest. Hungary’s BUX outperformed its regional peers on Wednesday. Wall Street also posted gains, powered by NVIDIA and AI developments. The ECB’s president reportedly plans early departure. Hungary’s bond yields sank again, bucking the international trend; the EUR/HUF remained below 380. Today, the eurozone releases labour cost and consumer confidence indices, while the USA publishes weekly jobless and monthly housing market data.
Western Europe’s stock markets closed at new highs, as did Richter’s share in Budapest
In Western Europe, some stock exchanges (STOXX 600, CAC40, FTSE100) closed at new highs on Wednesday, driven by gains in the materials, IT, defence, and banking stocks. All major regional stock markets closed in positive territory, helping the STOXX600 index rose 1.2%. Of the latter’s sectors, materials (+4.2%) were the engine of growth. Glencore shares advanced by 4.5% after the mining company said it would return USD 2 billion to shareholders, despite reporting slightly lower-than-expected profits.
The defence sector soared 2.9%. BAE Systems took off roughly 4% after reporting better-than-expected annual operating profit as global demand pushed its order book to a record GBP 83.6 billion (USD 113.50 billion). The defence sector was further boosted by the abrupt end of peace talks between Ukraine and Russia and rising concerns about a potential conflict between the USA and Iran.
Investor sentiment appeared to be stabilizing this week after a global sell-off since late January hit several sectors on concerns about artificial intelligence. The STOXX’s tech component surged 2.8%, while the banking sector gained more than 2%. In the latter, Mediobanca shot up 5.7% after Monte dei Paschi di Siena said it would take full control of the credit institution, ending weeks of uncertainty about the future of the commercial bank.
The chemical sector’s 1% drop, partly owing to Bayer’s 7.1% nose-dive, pared the STOXX’s gains yesterday. The German pharmaceutical company had announced a USD 7.25 billion deal to settle tens of thousands of lawsuits alleging its Roundup herbicide caused cancer. Shares of chemical and food ingredients maker IMCD slumped 4.7% as its Q4 results missed expectations.
Shares of Amrize jumped 12.8% to a record high yesterday. On Tuesday, the building materials company had announced a USD 1 billion share buyback programme and a special one-off dividend.
Meanwhile, the Financial Times reported that the European Central Bank’s president Christine Lagarde plans to step down before the 2027 French presidential election. Reportedly, she has not yet decided yet on the exact date of her departure, but she considers it important that Emmanuel Macron and German Chancellor Friedrich Merz be key European leaders in choosing her successor, the FT wrote, citing a source close to the matter.
In the benign external backdrop, the CEE region’s markets also advanced dynamically; the BUX’s 2.3% gain stood out. OTP (+3.2%) excelled, while other blue chips advanced 1%-1.3%. Richter ended Wednesday’s trading at a new high.
Wall Street posted gains, supported by NVIDIA’s gains and AI developments
Wall Street’s indexes also rose on Wednesday, fuelled by gains in NVIDIA, Amazon, and other tech heavyweights as concerns about artificial intelligence have moderated. Shares in NVIDIA increased by 1.6%, following the world's most valuable company’s announcement that it had signed a multi-year deal to sell its current and future artificial intelligence chips to Meta Platforms for millions of dollars. Meta shares ended Wednesday’s session 0.6% higher. Amazon (+1.8%) and Alphabet (+0.4%) also advanced on Wednesday. Sandisk, Western Digital, and Seagate Technology Holdings all gained 1.7%–4.3%, fuelled by huge demand for their storage technology for AI. The PHLX chip index grew by 1%.
The S&P 500 (+0.6%), the NASDAQ (+0.8%), and the Dow Jones Industrial Average (+0.3%) all closed higher yesterday. Six of the S&P500’s eleven sector indexes rose, particularly energy (+2%), followed by information technology and consumer durables (+1% each).
Data released on Wednesday (industrial production, housing data) reinforced the picture that the US economy had grown strongly in the fourth quarter.
Shares in Global Payments skyrocketed 16.5% as the payments technology company’s adjusted annual profit had surpassed expectations. Moderna shares jumped by 6.1% as the US Food and Drug Administration (FDA) had agreed to review its flu vaccine, reversing its earlier decision to refuse it.
Crude oil prices surged yesterday: WTI and Brent both soared around 4.5%, posting their biggest gain since October on fears that the US-Iran conflict could escalate into a military confrontation.
Bucking the international trend, Hungary’s bond yields sank; the EUR/HUF remained below 380
Most of the US economic indicators published yesterday were stronger than expected: industrial production expanded rapidly, durable goods orders fell less than feared, and housing starts also jumped markedly. In addition, the minutes of the Fed's January interest rate-setting meeting also revealed that decision-makers were strongly divided on the future interest rate path, with some calling for further cuts or holding rates steady, while others did not rule out a rate hike as the next step. As a result, the dollar yield curve shifted up by 2-3 basis points; the ten-year yield drew near 4.1% again. Bond yields did not change much in Europe; the 10Y German yield remained near 2.75%. A strong USD strengthening pushed the EUR/USD below a previous low of 1.18.
While the zloty (PLN) and the koruna (CZK) strengthened minimally against the euro yesterday, the forint weakened, leading the EUR/HUF to around 379. However, Hungarian bond yields continued to decline: benchmark yields dropped by 2-3 basis points; the 10Y yield sank to its lowest in the past twelve months, it is just a tad above 6.4%.
Today’s highlights
Asia’s stock markets also rose today: Japan’s Nikkei was up 0.8%, the MSCI Asia-Pacific index excluding Japan was seen 0.5% higher, while the markets in Hong Kong, China and Taiwan are still closed for the Lunar New Year. Meanwhile, the continuing tension between the USA and Iran has kept oil prices high, and investors are finding solace in gold, a safe haven asset. Europe’s index futures were mixed, their US peers were near-stagnant. WTI upped 0.35% this morning.
The eurozone’s labour cost and consumer confidence indices, as well as the US weekly jobless claims and monthly housing market data are in focus today.
In Hungary, the ÁKK auctions 3Y, 5Y, and 10Y bonds, offering HUF 20 billion, 25bn, and 25 billion, respectively.
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