OTP Morning Brief: Markets remain on hold ahead of the MNB rate decision and Middle East tensions
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OTP Morning Brief: Rising oil prices and US labor market data pushed developed market bond yields higher
Supported by favorable corporate earnings reports, leading Western European stock indices mostly posted modest gains on Thursday. In contrast, US equity markets closed lower. Eurozone retail sales fell by 0.3% month-on-month in June, while the May figure was revised upward. German industrial orders increased by more than expected. The data released on Thursday continue to support the resilience of the US labor market. Developed market bond yields rose alongside higher oil prices. The forint weakened by 1% against the euro, underperforming its regional peers. Following stronger readings in May, Hungarian retail sales and industrial production declined month-on-month in June. Today, the primary focus will be on July CPI data released by the HCSO and US labor market figures.
OTP Morning Brief: Strong corporate earnings buoyed the Stoxx600 and the Dow to new all-time highs, technology sector came under pressure
Key European equity indices edged higher on Wednesday supported by strong corporate earnings, with the Stoxx 600 and the DAX closing at record highs. In the US, however, the technology sector came under pressure, as shares fell sharply despite better-than-expected quarterly results from SpaceX and AMD, amid concerns surrounding AI-related investment spending. As a result, the S&P 500 and the Nasdaq declined, although the Dow closed at record high. The decline in oil prices came to a halt, while long-term yields in developed bond markets dropped further. Interest rate hike expectations eased in the US and the euro area as well. In the FX market, EUR/USD rose to 1.155, while the EUR/HUF closed below 362. Hungarian long-term bond yields declined. In Germany, factory orders data will be released, while euro area retail sales figures will also be today’s highlights. In Hungary, preliminary June industrial production figures and retail sales data are in the focus. In the US, weekly jobless claims data and Q2 productivity figures could also attract attention. In Europe, earnings reports from Siemens, Rheinmetall and Deutsche Telekom will be in investors’ focus, while in the US, results from Cloudflare and Datadog may be worth watching.
European equities closed mixed on Monday, as investors remained cautious ahead of this week's ECB rate decision, while ongoing Middle East tensions encouraged a wait-and-see approach. US indices declined, while semiconductor stocks outperformed, supported by AI-related optimism and reports about Alphabet’s chip development efforts. Oil prices experienced significant volatility: Brent crude surged above $90 per barrel before partially retracing on reports of a possible US-Iran diplomatic rapprochement. In the Hungarian market, the BUX rose, while OTP announced the acquisition of Luminor Bank. Today's trading session is likely to focus on the MNB's rate decision and the ongoing earnings season.
European indices close mixed; Ryanair’s weak earnings report keeps pressure on the travel sector
European equity markets finished mixed on Monday, as escalating tensions in the Middle East and investor caution ahead of this week's ECB rate decision encouraged a wait-and-see approach. Markets expect the ECB to leave interest rates unchanged this week, although pricing still reflects the possibility of one or two additional tightening moves by year-end. The STOXX Europe 600 index edged 0.3% lower, while rising energy prices supported oil and gas companies, enabling the sector to outperform the broader market. The situation in the Middle East continued to deteriorate, with risks to shipping through the Strait of Hormuz increasing on the ninth day of US military operations against Iran. As a result, Brent crude briefly surged above $90 per barrel, boosting energy stocks. At the same time, investors also monitored reports suggesting a potential diplomatic solution between the US and Iran, helping to ease concerns about further escalation. Travel and leisure stocks were the weakest performers. Ryanair shares fell around 6% after the airline reported a 34% decline in Q1 profit due to higher fuel costs and lower ticket prices. By contrast, technology stocks posted modest gains ahead of earnings reports from major US technology companies later this week. In the United Kingdom, Andy Burnham officially assumed the role of prime minister on Monday, becoming the country's seventh head of government within the past decade.
Sentiment remained positive across the Central and Eastern European region, with the BUX rising 0.4%, Poland's WIG20 gaining 0.5%, and Prague's PX50 advancing 0.3% compared to their previous closing levels. Hungarian blue chips delivered mixed performance: MOL and OTP moved higher, while Magyar Telekom and Richter edged lower. After the market close, OTP announced the acquisition of Luminor Bank, which operates in the Baltic region, marking the largest acquisition in the bank's history.
Leading US indices decline; chipmakers improve market sentiment
Leading US indices closed modestly lower on Monday. The S&P 500 fell 0.2%, the Nasdaq slipped 0.05%, while the Dow declined 0.6% compared to their previous closing levels. The market was primarily supported by a rebound in technology and semiconductor stocks, although this was not enough to lift the major indices into positive territory by the end of the session. Risk appetite improved during the day after comments from Iranian officials left the door open to a diplomatic resolution, while intermediaries presented a proposal for a 10-day ceasefire to Washington and Tehran. Later in the session, however, concerns over global energy supply resurfaced after Yemen's Houthi movement announced a maritime blockade against Saudi Arabia.
Among corporate developments, Alphabet was in the spotlight after media reports indicated that the company is working on a new artificial intelligence-optimized chip. The stock rose nearly 3%, while the semiconductor sector also advanced following last week's sharp correction.
Among macroeconomic releases, the leading index attracted attention after declining 0.2% month-on-month in June, a larger drop than expected. The weaker reading was mainly driven by deteriorating consumer expectations and a decline in building permits issued. However, analysts at The Conference Board believe that softer consumer spending is being offset by expanding AI-related investment, prompting them to raise their GDP growth forecast for this year from 1.8% to 1.9%.
US yields rise; Middle East developments and central bank expectations drive markets
US Treasury yields moved higher on Monday, with the 10-year benchmark yield rising 6 basis points to 4.6%. Markets continued to price in the Fed's expected rate path, while the more favorable CPI data released last week moderated expectations of further monetary tightening. In Europe, investors focused on this week's ECB rate decision. Germany's 10-year Bund yield increased as market participants assessed the inflation outlook and the central bank's expected communication. In the foreign exchange market, the Hungarian forint strengthened modestly against the euro, while the EUR/USD exchange rate edged lower. In the Hungarian bond market, the long end of the yield curve moved higher, with the 10-year benchmark yield rising to 5.42%. Today's trading is likely to focus on the MNB's rate decision.
Today's highlights
Trading in Asia was mixed. Japanese equities moved higher, with the Nikkei rebounding from a multi-month low, while South Korean indices also advanced. Chinese and Hong Kong markets posted gains as well, whereas the Indian market recorded a slight decline this morning.
During the day, UK unemployment data and Germany's ZEW Economic Sentiment Index will be released, while in Hungary the focus will be on the MNB's rate decision. Among corporate earnings reports, General Motors' quarterly results will be in the spotlight.
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