OTP Morning Brief: The drop in oil prices brought relief to the markets
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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.
Global market sentiment improved on Wednesday, with European stock indices climbing to nearly two-week highs, while US markets rebounded after a three-day decline. Investor optimism was supported by hopes of easing tensions with Iran, along with a decline in oil prices and bond yields. In Hungary, the BUX closed slightly lower, while the forint strengthened against the euro.
European stock markets closed at nearly two-week highs
European markets closed with solid gains on Wednesday. The Stoxx 600 rose 1.5% to 620 points, while German and French indices also posted increases exceeding 1%. Technology, banking, mining stocks, and the defense sector led the market higher. In the UK, the inflation reading supported sentiment: April CPI slowed to 2.8%, and following the better-than-expected data, the UK 10-year yield also moved lower.
Dutch ASML surged more than 6% after the company’s CEO said that demand for AI chips will remain robust in the coming years, as robotics and satellites could provide new drivers of growth, exceeding the industry’s production capacity.
The BUX closed 0.2% lower. Among blue chips, OTP rose 1% to HUF 41,100 on the last trading day before dividend payment. MOL declined by 1.8%, triggered by the sharp drop in oil prices.
US indices rebounded
After a three-day slide, US equity markets managed to rise, with all three major indices closing more than 1% higher, supported by falling oil prices and declining bond yields, while Brent is trading around $107 this morning. US President Donald Trump said yesterday that negotiations with Iran have entered the final stage, while also warning of further attacks if Tehran does not accept the peace agreement.
Nvidia released its earnings after Wednesday’s close, drawing strong investor attention. Despite reporting better-than-expected results, the stock slipped more than 1% in after-hours trading, highlighting that expectations were at extremely high levels. Revenue rose 85% to $81.6 billion, while EPS came in at $1.87 (vs. $1.76 expected). Demand for the company’s AI chips remains very strong. In contrast, software firm Intuit reported weaker-than-expected quarterly revenue, sending its share price down 13%.
Yields declined
Following news yesterday afternoon suggesting that an agreement between Iran and the US may be closer, energy prices and bond yields fell sharply. Oil and European gas prices dropped by 5–6%, while yields in developed bond markets declined by 10 basis points. The US 10-year yield fell to 4.6% and the German yield dropped below 3.1%. The dollar weakened slightly against the euro, moving toward 1.163.
Regional currencies strengthened somewhat against the euro, with the forint leading gains, rising 0.6% and pushing EURHUF below the 360 level. Reference yields published earlier by the Government Debt Management Agency (ÁKK), set before the drop in oil prices, remained broadly unchanged compared to Tuesday’s levels, with the 10-year benchmark yield at 5.6%, although yields declined on the domestic market later in the day. At the ÁKK’s six-month T-bill auction, the full announced amount of HUF 30 billion was sold at an average yield of 5.72%, while HUF 60 billion worth of bonds changed hands at switch auctions.
Today's highlights
Asian markets are moving higher, tracking yesterday’s US gains, with the strongest increases seen in Japan (+3.6%) and South Korea (+8.3%).
Ahead of today’s US open, Walmart will release its earnings, offering insight into the state of US retail, while weekly jobless claims, housing starts data, and manufacturing PMI readings are also due.
Today, the Government Debt Management Agency (ÁKK) will offer one-year T-bills, as well as 10- and 11-year bonds, with announced volumes of HUF 30 billion, HUF 15 billion, and HUF 20 billion, respectively.
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