OTP Morning Brief: Markets remain on hold ahead of the MNB rate decision and Middle East tensions
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OTP Morning Brief: US producer price index came in above expectations, yet the US 10-year Treasury yield still declined
Western European equities continued to advance despite ongoing pressure on the technology sector. Wall Street indices also rebounded, recovering some ground after Wednesday’s sell-off. Healthcare was the standout performer on both sides of the Atlantic. Eurozone industrial production declined by 0.5% month-on-month in August. In the US, the producer price index accelerated to 6.3%, delivering another upside surprise in inflation developments. US retail sales increased by 0.8% compared to August. The US 10-year Treasury yield declined by more than 10 basis points. The long end of the Hungarian government bond yield curve also declined by 7-9 basis points. In Hungary, August wage data will be released today, while in the US, September industrial production figures are due.
OTP Morning Brief: US CPI data came in above expectations
European equity markets advanced, supported by strong results from ASML and the outstanding performance of the healthcare sector. US equity markets came under pressure following higher-than-expected September CPI data. The annual CPI rate accelerated to 3.7%, driven primarily by a surge in gasoline prices, while core CPI rose by 0.3% month-on-month, supported by higher housing costs and rising transportation service prices. Oil prices rose amid escalating tensions in the Middle East and the impact of the IEA's oil market report. US Treasury yields retreated after an initial increase, driven by Fed commentary, while European bond yields generally moved higher. The US macro calendar will be busy today, with investors focusing on September retail sales and producer price index data, as well as the New York Fed Manufacturing Index, weekly jobless claims, and business inventories. August industrial production data from the euro area will be released today.
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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