OTP Morning Brief: Rebound in chip stocks led equity markets higher
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OTP Morning Brief: Crude oil prices plunged sharply as the Middle East conflict eased
The first trading day of the week brought modest gains to the major European stock markets, as sectors benefiting from the easing of the Middle East conflict offset declines in the technology and energy sectors. Stock markets across the CEE region also moved higher, with the BUX gaining 0.7%. Wall Street indices closed mixed with minor moves, as investors turned their attention to the Fed's upcoming interest rate decision later this week and earnings reports from major technology companies. WTI crude futures fell by more than 7%, while Brent crude declined by over 8%. Developed-market bond yields declined as easing concerns over CPI, driven by lower oil prices, boosted demand for fixed-income assets. Domestic long-term bond yields also moved markedly lower. The EURHUF exchange rate is trading around the 360 level. Today marks the start of the Fed's two-day rate-setting meeting, while the earnings season continues with reports from several major companies.
OTP Morning Brief: Airstrikes eased in the Middle East
European indices advanced on Friday, allowing them to end the week in positive territory once again. The July PMI data painted a positive picture of the eurozone outlook, although Trump imposed new tariffs, including measures affecting Europe. The BUX declined on Friday, but still ended the week in positive territory. According to the HCSO, employment declined while unemployment increased. Airstrikes between Iran and neighboring countries eased over the weekend. This pushed oil prices back below $100 per barrel. The S&P declined on Friday and posted a loss for the week as a whole. The composite PMI also increased in the US. Developed market government bond yields retreated from their local highs. Hungarian bond yields increased, while the forint strengthened slightly. Q2 GDP data will be released this week for Hungary, the eurozone, and the US. In addition, investors will be watching eurozone and US CPI data, as well as the Fed's interest rate decision.
Despite the deteriorating geopolitical environment and rising oil prices, equity markets in developed economies closed higher on Tuesday as optimism regarding the outlook for semiconductor manufacturers regained momentum. In bond markets, however, long-term yields edged higher, with both the US and German benchmark yields approaching the peaks reached in May. EUR/USD closed just below 1.14. In Hungary, the focus yesterday was on the MNB’s rate-setting meeting, where, in line with expectations, policymakers decided on a 25bp rate cut. At the post-meeting press conference, Governor Mihály Varga reiterated the forward guidance communicated earlier, signaling further easing over the summer. Yields with maturities of more than one year fell in the Hungarian bond market; the forint weakened following the interest rate decision, and the EUR/HUF exchange rate closed at 362. The Hungarian equity market advanced, with the BUX reaching a new intraday record high, driven by strong momentum in OTP shares. The focus of today’s trading session in international markets will be on corporate earnings releases, including results from Alphabet, Tesla, and Texas Instruments.
Optimism returned to European equity markets, with major indices advancing under the leadership of the technology sector
Despite escalating geopolitical tensions in the Middle East and another uptick in crude oil prices, sentiment across European equity markets improved on Tuesday, supported by a rebound in the technology sector. The Stoxx 600 and the FTSE closed 0.6% higher, while the DAX climbed 0.7%. German semiconductor manufacturer Infineon surged nearly 6%, benefiting from renewed investor interest in chipmakers after stronger-than-expected export data from South Korea and Taiwan. ASMI gained 5.4%, while ASML advanced 4.7%. Technology was the best-performing sector among the Stoxx 600 industry indices, while materials also delivered solid gains — tracking higher copper and gold prices — alongside the banking sector. Among mining companies, however, Sweden’s Boliden fell nearly 6% after reporting weaker-than-expected quarterly operating earnings. Media, consumer goods, and food producers were the worst-performing sectors within the Stoxx 600.
Germany’s ZEW economic sentiment index improved by more than expected in July.
Corporate earnings reports are increasingly moving into the spotlight for investors. Building materials producer Wienerberger issued a profit warning for the full year, causing its shares to fall more than 4%. Swiss wealth manager Julius Baer also closed around 4% lower despite reporting stronger-than-expected net new money inflows in the first half, while elevator manufacturer Schindler plunged more than 5% after quarterly revenue came in below expectations. Novartis gained 2% after reporting Q2 operating profit in its core business that exceeded market consensus estimates. Shares of UK-based facilities management and outsourcing company Mitie skyrocketed 39% on news that it would be acquired by rival OCS Group International for 3.1 billion pounds.
Sentiment was also positive across the CEE region on Tuesday. The BUX closed 1.6% higher and reached a new all-time intraday high, while Poland’s WIG20 advanced 1.8% and the Czech PX gained 0.8%. In Hungary, the rally was led by OTP, which closed 3% higher and approached its record level reached on July 6 following Tuesday’s announcement regarding its expansion in the Baltics. MOL and Magyar Telekom posted notable gains, while Richter retreated by more than 1%.
The front-month European natural gas futures contract rose by around 2%, climbing to a four-month high near EUR 60/MWh.
Major US equity indices advanced on Tuesday, led by semiconductor stocks
Major Wall Street indices closed higher on Tuesday, as a strong rally in semiconductor stocks diverted attention from the latest military clashes in the Middle East and ongoing tariff disputes, while investors looked to upcoming earnings reports from major technology companies for signals on the future of the artificial intelligence sector. The Dow gained 0.7%, the S&P 500 rose 0.9%, and the Nasdaq Composite advanced 1.3%. The Philadelphia Semiconductor Index surged more than 5%, posting gains for a second consecutive session after last Friday’s decline had left it 20% below its late-June all-time high. Expectations surrounding the earnings season remain elevated, particularly within the technology sector. According to market commentators, investors are rotating back into tech stocks out of fear of missing a potential rally driven by strong corporate results. Despite last week’s pullback, the semiconductor index remains up nearly 75% year-to-date, while valuations continue to stand at elevated levels.
Among the S&P sector indices, technology posted the strongest gains, followed by the energy sector, while consumer staples and telecommunications delivered the weakest performance. Among individual stocks, 3M jumped more than 7% after raising its earnings outlook for the year. Hasbro surged nearly 9% after the company increased its revenue and profit guidance for 2025. Healthcare firm Danaher lost 11% of its value after reporting weaker-than-expected revenue and lowering its full-year sales forecast. MSCI shares also closed down more than 10% after the company projected higher cost growth than previously anticipated. Auto parts distributor Genuine Parts cut its annual profit forecast, sending the stock nearly 3% lower.
Investors were also unfazed by President Trump’s latest tariff announcement, under which a 50% tariff was imposed on Canadian exports worth USD 20 billion.
Crude oil prices rose by more than 2% on Tuesday, with Brent climbing above USD 91 per barrel and WTI reaching USD 84.5, its highest level in more than five weeks. The advance also marked the third consecutive day of gains amid mounting supply concerns across several key export routes. The US has continued its airstrikes against Iran for a tenth straight day without interruption, while President Trump warned that Tehran would “pay the price” for attacks that claimed the lives of American soldiers. According to reports, another tanker carrying refined petroleum products was attacked near the Strait of Hormuz, while Yemen’s Houthi militants threatened to disrupt Saudi maritime traffic in the Red Sea, forcing at least one Saudi crude tanker to turn back. In addition, attacks on the Caspian Pipeline Consortium terminal on the Black Sea coast disrupted Kazakh oil shipments.
Developed market yields moved higher as Middle East developments and central bank expectations continue to drive market sentiment
Long-term yields edged higher across developed bond markets, with the US 10-year Treasury yield rising 3bp to 4.63% and the German 10-year Bund yield increasing 2bp to 3.17%. As a result, the US benchmark approached the near 18-month high reached in May, while the German benchmark climbed close to its own decade-high level seen in mid-May. Bond markets continued to be driven by concerns over further escalation in the Middle East, rising oil prices, strengthening fears of higher CPI, and expectations of tighter monetary policy. In the US, Fed Chair Kevin Warsh has repeatedly emphasized that CPI remains one of the central bank’s primary concerns, a message echoed by several other Fed officials in recent weeks. Policymakers have now entered the customary blackout period ahead of next week’s FOMC meeting, where the Fed is widely expected to leave its policy rate unchanged. Nevertheless, expectations for a more restrictive policy stance beyond July remain elevated, with traders pricing in a 68% probability of a rate hike in September. As for the ECB, expectations for further tightening remain firm. While markets anticipate no change at Thursday’s meeting and expect the ECB to maintain its cautious, data-dependent approach, investors are still pricing in roughly two additional rate hikes by year-end, with the first potentially coming as early as September. EUR/USD slipped marginally below 1.14, reflecting a modest strengthening of the US dollar.
The MNB lowered its policy rate by 25bp to 5.75% on Tuesday, in line with market expectations. At the press conference following the decision, MNB Governor Mihály Varga reiterated the guidance provided in June, stating that, should favorable conditions persist, there remains room for further rate cuts over the summer. He added that the central bank will reassess the possibility of additional easing in September once updated forecasts become available. Interest rate futures continue to price in two more rate cuts by year-end with high probability, although expectations for a second move have eased over the past week. The forint weakened modestly against both the euro and the US dollar on Tuesday, with EUR/HUF closing at 362. In the secondary government bond market, yields mostly declined based on early afternoon quotations, with the 10-year yield falling to 5.4%. At yesterday’s three-month T-bill auction, demand was only slightly above supply, and the Debt Management Agency sold HUF 25.5 billion of securities, below the planned HUF 30 billion.
Today's highlights
Sentiment across Asian equity markets was mixed this morning. Japan’s Nikkei was up 0.4% ahead of the close, while Chinese markets showed a mixed picture, with the Shanghai Composite edging 0.1% higher. Hong Kong’s Hang Seng, meanwhile, was down 1%. South Korean equity indices significantly outperformed the region, surging between 1% and 4%, while Taiwan’s benchmark indices also traded firmly in positive territory.
The House of Representatives approved a government funding bill on Tuesday evening that extends financing for all federal operations through the midterm elections, a move aimed at avoiding a government shutdown months ahead of the September 30 deadline.
European equity futures point to a higher open, while US markets are expected to start the session lower. Today’s earnings releases are attracting considerable investor attention. In the US, Alphabet, Tesla, Texas Instruments, and ServiceNow are scheduled to report after the closing bell, while Philip Morris and AT&T will publish their results before the market opens. In Europe, Santander, Iberdrola, and Lonza Group are also expected to release earnings today.
On the macro front, the June UK CPI data will be released today.
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