OTP Morning Brief: In Western Europe, the leading indices rose, while in the US they closed on a mixed note
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OTP Morning Brief: Declining expectations for US interest rate hikes improved market sentiment
European stock indices advanced, while Trump's remarks and easing expectations for US interest rate hikes improved sentiment; the rise in European producer prices accelerated. Major US stock indices rose on the back of declining expectations for interest rate hikes; initial jobless claims came in line with expectations, while the ISM Services PMI exceeded forecasts. Developed market yields declined following gains in previous days, after dovish remarks from a Federal Reserve governor and a conciliatory statement by President Trump; the forint strengthened on reports that the MNB may pause its rate-cutting cycle and lower its CPI target. Several labor market reports are due from the US today, with the change in nonfarm payrolls standing out among them. Germany will release industrial orders data, while retail sales figures are scheduled from both the euro area and Hungary.
OTP Morning Brief: US treasury yields snap multi-day rise
Geopolitical tensions continued to influence major market moves on Wednesday, particularly in Europe, where equities posted modest declines. In contrast, the main U.S. stock indices advanced by around half a percent, breaking the negative streak seen over recent days. Investors also welcomed the end of the recent rise in U.S. Treasury yields, which had weighed on market sentiment in recent sessions. The move was supported by a weaker-than-expected ADP employment report, although some of the positive impact was offset by higher Brent crude prices, adding to uncertainty. Domestically, bond yields continued to increase, while the forint managed to strengthen slightly against the euro. Asian markets showed a mixed performance this morning, although China's services PMI improved in August.
The STOXX 600 rose by 0.8%, closing at a record high. Bayer received a favorable court ruling in the Roundup herbicide case, and the German company’s shares soared. According to Isabel Schnabel, the ECB needs to raise interest rates further. Markets are still pricing in one more hike this year. According to data released by the KSH, the unemployment rate in Hungary declined to 4.3%. The US indices closed on a mixed note. Micron’s share price soared by 15.7%. US Q1 growth was revised up to 2.1%. Core PCE rose by 0.32% month-on-month in May. Both Hungarian and international bond yields declined on Thursday. The forint strengthened by 0.3% to 354.5 against the euro. Asian indices are in a sharp decline this morning.
Western European stock indices rose
Western European stock indices rose. The STOXX 600 rose by 0.8%, closing at a record high, while the DAX gained 1%, the CAC 40 added 0.5%, and the FTSE 100 advanced by 0.7%. Healthcare stocks contributed the most to the rise, with the sector index finishing 1.5% higher. Bayer’s share price soared by 18.7% after securing a legal victory, as the US Supreme Court limited lawsuits alleging that the German manufacturer failed to warn users about the potential cancer risks of its Roundup herbicide. The technology sector gave back part of its intraday gains but still closed 0.8% higher. Positive outlooks from Micron and Qualcomm eased investor concerns that AI-related stocks had become excessively overvalued. Among European chipmakers, Infineon and STMicroelectronics climbed by 3.1% and 5.1%, respectively, while semiconductor equipment supplier ASML moved 2.6% higher. Shares of Siemens Energy, which also produces AI-related equipment, increased by 2.3%. Among individual stocks, private equity firm 3i Group jumped 11.4%, while EasyJet rose by more than 5% after rejecting a fourth takeover bid from US investment firm Castlelake.
According to Isabel Schnabel, the ECB’s hawkish Executive Board member, the European Central Bank needs to raise interest rates further, as energy prices remain elevated and the Middle East ceasefire does not justify a pause. Market participants expect at least one more rate hike by year-end, assigning roughly a one-third probability to a move at the July 22–23 meeting, although a September step is seen as more likely.
According to data released by the KSH, the unemployment rate in Hungary declined to 4.3%. At the same time, the downward trend in employment appears to be stabilizing based on the latest figures. Although a year-on-year decline of 33,000 is still visible, shorter-term data indicate a rise in employment.
In the region, the BUX rose by 0.6% and Poland’s WIG20 gained 1.3%, while the Czech PX50 declined by 0.2%.
The US indices closed on a mixed note
On Thursday, the S&P 500 was little changed. The Nasdaq Composite fell by 0.5%, while the Dow Jones edged 0.1% higher. Technology stocks reversed course after early gains, putting pressure on the Nasdaq. Apple shares dropped 6.1% after the company raised prices for iPads and MacBooks to offset higher costs for memory and storage chips. Shares of Nvidia, Microsoft, and Alphabet declined between 0.5% and 3.5%. Meanwhile, Micron’s share price soared by 15.7% after the company’s results and guidance exceeded Wall Street expectations, while memory chipmaker SanDisk jumped 22%.
US Q1 growth was revised up, with GDP expanding at an annualized rate of 2.1% instead of the previously estimated 1.6%. The 0.5 percentage point upward revision was primarily driven by a downward adjustment to imports. At the same time, the growth rate of consumer spending was cut from 1.4% to 0.5%, mainly due to a downward revision in services expenditure. Early Q2 data suggest that consumption has strengthened again, partly supported by substantial tax refunds.
Core PCE rose by 0.32% month-on-month in May, while the year-on-year figure increased by 0.1 percentage points to 3.4%. Services inflation was particularly broad-based, rising by 0.45% month-on-month, suggesting that rapid disinflation is less likely. The latest inflation data remain inconsistent with the Fed’s 2% target, and according to FedWatch data, markets are already pricing in a 25-basis-point rate hike for September.
Consumer spending rose by 0.7% month-on-month in May, exceeding expectations. The data reinforce the view that households have weathered the gasoline price shock relatively well. Nominal incomes increased by 0.7% on a monthly basis, matching the expansion in spending, leaving the savings rate broadly stable at around 3%.
Oil prices rose by more than 1% after a report indicated that Tehran plans to collect billions from reopening the Strait of Hormuz.
Both Hungarian and international bond yields declined on Thursday
US Treasury yields declined by a few basis points after May inflation data came in slightly more favorable than some investors had expected, although the headline PCE year-on-year price index rose to 4.1%, and the core PCE remains inconsistent with the Fed’s inflation target. The US 10-year yield thus edged just below 4.4%. Meanwhile, German yields also fell by a few basis points, with the 10-year at 2.86%. Following recent gains, the dollar weakened modestly against the euro to 1.138.
Hungarian government bond yields also declined, with the 10-year falling by 3 basis points to 5.09%. Demand was strong at the auctions of 3-, 5-, and 10-year bonds. Against announced amounts of HUF 20bn, HUF 20bn, and HUF 25bn, the Government Debt Management Agency accepted bids totaling HUF 76bn, HUF 40bn, and HUF 85bn, respectively, while total demand for the three instruments exceeded HUF 450bn. The forint strengthened by 0.3% to 354.5 against the euro.
Today's highlights
As technology stocks came under pressure, Asian indices turned to a significant decline. Approaching the close, the Nikkei was down 4.7%, the KOSPI dropped 7.8%, the SSEC fell 2.1%, while the Hang Seng declined by 1.9%. Oil prices have also turned lower again this morning.
Today, the KSH will publish Hungary’s Q1 current account data.
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