OTP Morning Brief: Strong corporate earnings buoyed the Stoxx600 and the Dow to new all-time highs, technology sector came under pressure
Related content
OTP Morning Brief: AI optimism and falling oil prices propelled stock indices to new highs
Favorable earnings reports and continued AI optimism provided further support for equity markets, with both the STOXX 600 and the BUX climbing to new highs, while among the major US indices, the Dow and the S&P 500 also reached record levels. One of the biggest winners of the earnings season was Palantir, whose shares soared nearly 30% yesterday. Investor sentiment was further boosted by optimism over easing tensions in the Middle East, which led to a sharp decline in oil prices and lower bond yields. In the foreign exchange market, the EUR/USD rose to a seven-week high, while the Hungarian forint also performed strongly, with EUR/HUF falling close to 361. OTP Group reported excellent first-half results this morning. Later today, attention in the US will focus on the ADP employment report and the ISM Services Index, while corporate earnings will remain firmly in the spotlight. In Europe, companies reporting today include Novo Nordisk, Infineon and Glencore, while in the US we will be watching results from Berkshire Hathaway, Eli Lilly and Sandisk.
OTP Morning Brief: Trump's de-escalation comments drove equity markets higher
Trump postponed a potential attack on Iran and signaled the prospect of diplomatic talks, helping to boost market optimism. European markets advanced, including the BUX, which closed at a record high. German retail sales disappointed. In contrast, US equities posted a strong rally, with the Dow also closing at a record high. At the same time, bond yields declined. The yen continued to strengthen following Friday's intervention.
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.
Optimism persists on European stock markets, while Magyar Telekom reported broadly in-line second-quarter results
Optimism driven by corporate earnings reports persisted across European markets on Wednesday, offsetting concerns related to developments in the Middle East. The Stoxx 600, DAX and CAC 40 all closed at record highs, while the FTSE also moved close to an all-time peak. Among sector indices, mining stocks led the gains, supported by soaring gold prices amid a weaker dollar. Glencore rallied 4% after reporting better-than-expected results and an 86% increase in first-half profit. Siemens Energy's share price was little changed despite reporting record financial third-quarter earnings. Heineken advanced 2.2% after delivering stronger-than-expected quarterly results following a workforce reduction of 3,000 employees. Prudential fell more than 6% after reports suggested that Chinese tax authorities had begun taxing returns generated from foreign insurance policies. The weakness also weighed on Europe’s Asia-focused banks, with HSBC shares dropping nearly 5%. Novo Nordisk declined 4.3% despite raising its full-year revenue and profit guidance. Investors focused instead on sales of the new Wegovy tablet, which came in slightly below expectations, as well as the setback in clinical trials of the next-generation obesity treatment CagriSema. In contrast, Sandoz rallied 6% after the Swiss generic drugmaker announced a 9% increase in second-quarter net sales, driven by strong growth in biosimilars as patent protection on several leading drugs expired.
Yesterday, euro area producer price index data were released and came in line with expectations, showing a 0.3% month-on-month decline and a 4.6% increase on an annual basis. The final July reading of the euro area services PMI was slightly revised higher from the preliminary estimate and reached its highest level in five months.
Optimism was not fully sustained across the CEE region, with the BUX slipping 0.7% and the WIG20 declining 0.3%, while Prague’s PX edged 0.1% higher. On the Hungarian market, OTP, which released its Q2 earnings report on Wednesday, retreated 1%, while Mol lost 2.3% of its value. Richter closed 1.3% higher and Magyar Telekom gained 0.8%. After the market close, the telecom company published its latest earnings report, with results broadly in line with analysts’ expectations. Second-quarter revenue increased by nearly 1% year-on-year, while operating profit and EBITDA both declined by around 1%. The EBITDA margin also deteriorated slightly.
Dow reaches a new record high, while SpaceX and chipmaker AMD drag the Nasdaq lower
Trading on Wall Street was mixed on Wednesday. The Dow closed at a new record high, while the S&P 500 slipped 0.2% despite reaching an intraday all-time high. Meanwhile, the Nasdaq Composite declined 0.8%, marking its first loss after four consecutive sessions of gains. SpaceX and AMD, both of which reported better-than-expected revenue figures after Tuesday’s close, nevertheless suffered sharp losses during Wednesday’s session, with SpaceX plunging 14% and AMD falling 7%. In both cases, investors were concerned about the sustainability of spending on artificial intelligence-related investments, particularly data centers. At the sector level, telecommunications and energy posted the weakest performance, while IT finished broadly flat. The materials and healthcare sectors led the gains. Amgen rallied nearly 5%, helping lift the Dow to a record high after the drugmaker reported a 9% increase in second-quarter revenue. Eli Lilly jumped almost 5% following a favorable earnings release. Disney also contributed to the Dow’s strong performance, advancing nearly 4% after reporting stronger-than-expected quarterly profit.
The July ISM services index came in weaker than expected, while Wednesday’s ADP report also disappointed, showing that private-sector employment increased by just 44,000 jobs last month, the lowest reading since January. The June figure was also revised slightly lower.
The sharp decline in crude oil prices came to a halt on Wednesday after optimistic statements from US officials were not confirmed by the Iranian side, although markets remained highly confident that an agreement to reopen the Strait of Hormuz was imminent. By the end of the day, WTI was little changed at around USD 75 per barrel, while Brent also closed unchanged from the previous day at approximately USD 79 per barrel.
Long-term yields continued to edge lower in both the US and the euro area, while EUR/USD rose to 1.155. Domestic long-term yields declined, with EUR/HUF closing below 362
On Wednesday, the sharp declines seen in recent days in developed bond markets came to a pause, with benchmark long-term yields edging only slightly lower. The US 10-year Treasury yield fell by 1bp to 4.62%, moving further away from the 18-month high reached on Friday. Expectations that the Strait of Hormuz could be at least partially reopened continued to weigh on oil prices, easing CPI concerns and reducing expectations for further monetary tightening. According to the CME FedWatch Tool, markets are pricing in a 55% probability of a 25bp Fed rate hike in September, while the prospect of an additional move has been pushed back to June next year. On the central bank front, Fed Governor Lisa Cook reiterated that she remains prepared to support further rate hikes if CPI does not continue to moderate. Mary Daly, President of the San Francisco Fed, said she supported the central bank’s decision last week to leave interest rates unchanged, while warning that persistently elevated CPI could require a stronger monetary policy response. The US Treasury announced on Wednesday that it would maintain issuance levels for both fixed-rate and floating-rate securities unchanged for “at least the next several quarters.” The decision eased concerns that an earlier-than-expected increase in long-dated government bond issuance could put additional upward pressure on yields, which are already trading near multi-year highs. Germany’s 10-year government bond yield also remained close to the previous day’s level, ending at 3.1%, its lowest level in more than two weeks. Expectations for further rate hikes in the euro area also moderated, with the ECB Watch indicator pricing in a 2.5% policy rate by year-end, implying only one additional rate increase, most likely in September. The euro continued to strengthen against the dollar on Wednesday, with EUR/USD rising to 1.155, its highest level since mid-June.
Bond yields across the CEE region were mixed yesterday following a volatile session in developed bond markets. Hungarian long-term yields, together with their Czech counterparts, declined notably, with the Hungarian 10-year yield closing 7bp lower at 5.40%. Based on quotations published by the Government Debt Management Agency (ÁKK) in the early afternoon, benchmark yields in the segment beyond one year fell by 5-7bp. The forint weakened against the euro but remained below the 362 EUR/HUF level.
Today's highlights
Following the strong gains recorded over recent days, Asian equity markets were mostly in negative territory. Japan’s Nikkei fell 1%, while Hong Kong’s Hang Seng retreated 1.8% ahead of the close of morning trading. The Shanghai Composite was little changed. Most South Korean indices also posted substantial losses.
US and European equity index futures point to a mostly positive open for the major benchmarks, although the technology sector may remain under pressure.
Crude oil prices continued to edge lower this morning after Iran and Oman reached an agreement on a shipping route through the Strait of Hormuz, reinforcing expectations of increased Middle Eastern crude shipments. A joint statement by the two countries is currently under review and being finalized. The proposed route is expected to remain operational for two to four months, although Tehran emphasized that the agreement does not represent the full reopening of the strategically important waterway. Meanwhile, US officials continued to express optimism that an agreement with Iran is drawing closer. According to leaked reports, Iran may retain control over traffic entering the Strait of Hormuz. At the same time, Iran-backed Houthi militants in Yemen claimed responsibility for targeting a Saudi oil tanker in the Gulf of Aden and threatened other vessels operating in the Red Sea, once again highlighting the shipping risks facing the region.
Today, market participants will focus on June German industrial orders, euro area retail sales figures, Italian industrial production data, as well as construction PMIs for the euro area and its major economies. In the US, alongside weekly jobless claims, Q2 productivity and unit labor cost data will be released, while wholesale inventories figures will also provide further insight into economic conditions.
In Hungary, preliminary June industrial production data and retail sales figures will be released today.
The Government Debt Management Agency (ÁKK) will hold auctions today for 3-year, 5-year and 10-year government bonds, with planned issuance amounts of HUF 15 billion, HUF 15 billion and HUF 20 billion, respectively.
The corporate earnings season continues. In Europe, investors will be watching results from Siemens, Deutsche Telekom, Zurich Insurance, Generali, Rheinmetall, Diageo and Henkel, among others. In the US, earnings reports from Berkshire Hathaway, ConocoPhillips, Howmet Aerospace, Cloudflare and Datadog are likely to be in the spotlight.
Get more out of your investments!
Global Markets Services
OTP Global Markets offers a broad range of services in the field of local and international money and capital markets.
Read morePrivate Banking Services
Personal care and expertise with OTP Private Banking, along with the knowledge, security, and innovations of a multinational banking group.
Read more