OTP Morning Brief: Geopolitical tensions in the Middle East remain elevated
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OTP Morning Brief: Thursday trading brings equity market correction and rising oil prices
European equities closed slightly lower, primarily due to weakness in the technology and defence sectors. A more significant correction unfolded on US equities markets as a wave of selling hit technology stocks, while oil and natural gas prices rose markedly amid escalating geopolitical tensions. Amid growing investor caution, both US and German government bond yields declined, while the dollar edged higher against the euro after experiencing significant intraday volatility. Longer-dated yields also declined on the Hungarian bond market, while the forint weakened against both the euro and the dollar. The negative sentiment spilled over from US markets into Asia, with most major Asian equity indices trading in negative territory during the morning session. Today's focus will be on the October US labour market data, which could materially influence market expectations regarding the Federal Reserve's December rate decision. Additionally, retail sales data will be released from both the euro area and Hungary, while Germany will publish its September industrial production figures.
OTP Morning Brief: Investor sentiment improved following the Democrats’ congressional victory and the decline in oil prices
Lower bond yields and oil prices, driven by the Democrats’ expected congressional majority, improved market sentiment. Brent crude has fallen by roughly 20% since the beginning of the week, while the yield on the 10-year US Treasury note declined by 6 basis points to 4.89%. Amid the favourable risk environment, the US dollar weakened, with the EUR/USD exchange rate rising to near 1.123. In Europe, positive corporate news also supported market sentiment, with the STOXX 600 index rising by 1.8%, while shares of Novo Nordisk gained 5.6% after the company raised its full-year guidance. Today, investors will focus on German industrial orders, French industrial production and the euro area producer price index, alongside interest rate decisions by the Bank of England and the Czech central bank. In the US, weekly initial jobless claims, as well as Q3 productivity and labour cost data, will also be in the spotlight.
European indices closed lower on Tuesday, as persistent geopolitical tensions and expectations of further interest rate hikes continued to weigh on sentiment. Major US indices edged lower on Monday; the US government did not support Apple’s procurement of Chinese memory chips; meanwhile, the New York Fed’s manufacturing activity index improved. Developed market bond yields moved modestly higher, while the Hungarian forint weakened slightly against the euro. Today, the focus will be on Germany’s ZEW Economic Sentiment Index, UK unemployment data, and US industrial production and housing market figures.
European indices closed lower on Tuesday, as persistent geopolitical tensions and expectations of further interest rate hikes continued to weigh on sentiment
After early gains, European equity markets ultimately closed modestly lower yesterday, with the STOXX 600 index ending the session down 0.2%. As the corporate earnings season drew to a close, investors increasingly shifted their focus toward macroeconomic and geopolitical developments, as well as upcoming central bank decisions in September. Geopolitical tensions in the Middle East remained elevated after Iran refused to extend the temporary agreement that expired on Monday, while Donald Trump threatened to bomb Oman should it complicate negotiations between the US and Iran. Sentiment was further weighed down by market pricing, which indicated a 94% probability of a 25-basis-point rate hike by the European Central Bank in September, making such a move virtually certain, while investors also continued to price in the possibility of a second increase later this year. At the same time, the market received support from Goldman Sachs, which raised its 12-month target for the STOXX 600 index to 695 from 660, implying an additional upside potential of approximately 5.5% from current levels.
Among individual stocks, Accelleron surged 5.6% after Berenberg upgraded the company’s shares to buy. At the other end of the spectrum, SIG Group was the worst performer of the day, with its stock dropping 17.6% after the company appointed its chief financial officer as CEO, less than six months after the previous chief executive had taken office.
Major indices across the CEE region also closed lower yesterday, with the Polish market posting the largest decline, while Prague’s index was virtually unchanged. Among Hungarian blue chips, MOL managed to rise, Richter traded flat, while the other two heavyweight stocks ended the session lower.
Major US indices edged lower on Monday; the US government did not support Apple’s procurement of Chinese memory chips; meanwhile, the New York Fed’s manufacturing activity index improved
A modest decline emerged in US equity markets yesterday, while oil prices moved higher amid escalating geopolitical tensions in the Middle East. Investor sentiment was primarily shaped by the expiration of the ceasefire agreement between Washington and Tehran, as Iran ruled out extending negotiations and signaled that it could adopt a tougher stance should diplomatic efforts fail. Some technology stocks, however, outperformed the broader market. Micron Technology shares rose 4.1% after the US administration indicated that it did not support Apple’s procurement of Chinese memory chips, a development that could improve the outlook for US manufacturers. Optimism surrounding the AI sector was further reinforced by Anthropic’s strong revenue figures.
The New York Fed’s manufacturing activity index rose to 20.6 in August from 15.6 in July, significantly exceeding market expectations of 11.0. The data indicate that manufacturing activity in New York State expanded for a second consecutive month, with the pace of growth reaching its strongest level since late 2021. According to the report’s details, both new orders and shipments continued to show robust growth, while the delivery times index increased to 20.6, pointing to renewed strains in supply chains. Employment and hours worked also posted moderate gains. The pace of growth in input costs accelerated, whereas increases in selling prices moderated, although they remained elevated. Overall, business expectations remained favorable, with firms anticipating stronger demand, higher shipment volumes, and further job growth in the months ahead. However, pricing pressures continue to pose a risk. Meanwhile, capital spending plans remained subdued.
Developed market bond yields moved modestly higher, while the Hungarian forint weakened slightly against the euro
US Treasury yields moved higher yesterday, while oil prices resumed their upward trajectory amid escalating tensions between Iran and the US. The yield on the 30-year US Treasury bond rose by 5 basis points to 5.31%, marking a 19-year high. Meanwhile, the 10-year yield increased by nearly 3 basis points, while the 2-year yield added 1 basis point. According to market participants, the rise in yields was partly driven by higher energy prices and the associated CPI risks. US WTI crude oil rose 2.5% to USD 84.5 per barrel, while Brent crude climbed above USD 90 per barrel, as the deadline for a peace agreement between Washington and Tehran approached and Iran signaled that it would not support an extension of the arrangement. At the same time, analysts increasingly argue that the main driver behind the increase in long-dated yields is no longer CPI, but rather the deteriorating fiscal position of the US, rising government debt issuance, higher risk premiums demanded by investors, and the substantial capital requirements of AI-related investments, which are increasing supply in the corporate bond market. Data released last week showed that the US budget deficit climbed to its highest monthly level in more than five years, further intensifying concerns about fiscal sustainability.
In line with international trends, Hungarian yields beyond the one-year segment rose by 1-3 basis points yesterday, with the 10-year benchmark closing at 5.42%. The Hungarian forint was virtually unchanged against the euro, ending the session above 363. After an initial advance, the euro ultimately showed little change against the US dollar and fluctuated near the 1.16 level.
Today's highlights
Major Asian indices were mostly trading lower this morning after the temporary agreement between Iran and the US expired, while Tehran announced that it would shift from a defensive posture to conducting offensive military operations.
Today, the focus will be on Germany’s ZEW Economic Sentiment Index, UK unemployment data, and US industrial production and housing market figures.
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