OTP Morning Brief: Both the US and Hungarian finance ministries made important announcements
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OTP Morning Brief: Major stock markets ended the week in negative territory despite a strong performance on Friday
Developed markets moved largely in tandem: both Europe and the US posted gains on Friday, although this was not enough in either region to prevent the major indices from ending the week in negative territory. August PMI data for both the US and the euro area came in stronger than expected, providing a modest boost to optimism across both regions. Bessent announced on Wednesday an expansion of US Treasury buybacks, but the move only managed to push yields lower temporarily. Asian equities opened the week lower. This week, the Hungarian central bank's rate-setting meeting will be worth watching closely.
OTP Morning Brief: Geopolitical risks have once again moved to the forefront
Major European and US equity indices closed lower on tuesday, with the technology sector underperforming particularly sharply. Oil prices were supported by escalating US-Iran tensions and uncertainty surrounding the Strait of Hormuz, resulting in a rise in crude prices. US Treasury yields declined, while the yield on Germany’s 10-year Bund rose to its highest level since 2011. The forint weakened against major currencies. Investors will focus on the release of the Fed minutes and the UK CPI data later today.
Monday was quiet in terms of macroeconomic data releases. US indices closed mixed, weighed down by the weak performance of the technology sector. US Treasury Secretary Scott Bessent announced further tightening of sanctions against Iran, primarily through the expanded use of secondary sanctions. Brent crude prices declined after six consecutive days of gains. The pan-European Stoxx 600 was virtually unchanged on Monday. The Hungarian government is planning a budget deficit equivalent to 7.5% of GDP for 2026. US long-term yields edged lower. In Hungary, markets are focused on today's interest rate decision by the MNB.
The pan-European Stoxx 600 was virtually unchanged on Monday
The pan-European Stoxx 600 was virtually unchanged on Monday. The DAX slipped 0.1%, while the CAC 40 fell 0.4%, whereas the FTSE 100 advanced 0.3%. Travel and leisure stocks gained on the back of lower oil prices, while the energy sector was the worst performer, declining 1.6%. Shares of automakers and auto parts suppliers dropped 1%, despite July data pointing to a recovery in European electric vehicle sales. The technology sector weakened 0.8% as investors awaited Nvidia’s earnings release on Wednesday.
With a 1.8% gain, the BUX outperformed both Western European and regional markets, as Monday marked the first trading session following the long weekend. Among the blue chips, OTP rose 2.4%, Richter advanced 3.5%, and Mol gained 1.7%, while Magyar Telekom lost 1.7% of its value. Elsewhere in the region, the Czech PX50 added 0.4%, and Poland’s WIG20 edged up 0.1%.
According to a statement released by the Ministry of Finance yesterday, the Hungarian government will submit its revised 2026 budget by August 31 at the latest. In line with the fiscal review published in July, the ministry stated that without the change in government and the measures introduced thereafter, the actual budget deficit would reach 8.3% of GDP. Measures implemented so far, including the agreement on EU funds, the restructuring of public interest asset management foundations, and declining government bond yields, have reduced the deficit to 7.5% of GDP. The government intends to incorporate this 7.5% deficit target into the revised budget. Accordingly, government debt as a share of GDP would increase from 74.6% to 77.5%. The statement noted that the debt ratio is expected to return to a declining path from 2027 onward. The draft 2027 budget is scheduled to be presented in October, together with the medium-term macroeconomic plan.
The price of European benchmark TTF natural gas rose a further 3.3%, reaching nearly EUR 69.
Wall Street indices closed mixed, weighed down by the weak performance of the technology sector
US stock indices closed mixed on Monday. The S&P 500 (-0.3%) and the Nasdaq Composite (-0.8%) moved lower, primarily due to weakness in technology stocks. Nvidia and Broadcom each fell nearly 3%, while Micron Technology dropped 5.8%. Texas Governor Greg Abbott, a Republican, voiced strong criticism of the AI industry after suspending approvals for grid connections for new data center projects. The criticism centered on the strain placed on the power grid and the sector’s deteriorating public perception. The industrial-heavy Dow Jones closed 0.3% higher.
US Treasury Secretary Scott Bessent announced further tightening of sanctions against Iran, primarily through the expanded use of secondary sanctions. He suggested that countries may have to choose between maintaining ties with Iran and preserving access to the US dollar-based financial system. For now, details remain limited, with no clarity on which countries would be affected or when the new measures might take effect. It remains uncertain to what extent the US is willing to risk friction with China through additional sanctions, such as targeting Chinese banks, especially after Beijing demonstrated last year that restrictions on rare earth exports could exert meaningful pressure on the US. Moreover, a presidential-level meeting between the two powers is expected next month, which may encourage a more cautious approach from Washington. After six consecutive days of gains, Brent crude prices declined again, falling 2.4% to USD 92.17 per barrel.
US President Donald Trump warned that tariffs on passenger vehicles, trucks, and automotive parts imported from Canada could increase to 50% from January 1, 2027, following the breakdown of trade negotiations over the weekend. The announcement weighed on automaker stocks, with Ford falling 3.3% and General Motors declining 1.1%.
Following a 1.1% gain on Monday, gold has now risen by more than 15% in August.
US long-term yields edged lower
US Treasury yields moved lower on Monday after reports emerged that the Treasury Department may finance an expansion of its bond buyback program using its cash balance. In addition, sentiment in the bond market was supported by a decline in oil prices following six consecutive days of gains. The US 10-year Treasury yield fell 3.4 basis points to close at 4.70%. Looking ahead, Wednesday’s core PCE release and Federal Reserve Chair Kevin Warsh’s speech at Jackson Hole on Friday are likely to be key market-moving events for bond investors. Meanwhile, the German 10-year Bund yield eased by 1 basis point to 3.25%, remaining close to its highest level in 15 years.
The Hungarian forint weakened 0.2% against the euro to 363.21, modestly underperforming its regional peers. However, the currency showed little reaction to the Ministry of Finance’s announcement that this year’s budget deficit could reach 7.5% of GDP.
Today's highlights
Asian equity markets are trading mixed as the close approaches. Japan’s Nikkei is up 0.4%, while the KOSPI, Hang Seng, and Shanghai Composite (SSEC) are posting modest declines.
Today, Germany will release its detailed Q2 GDP figures and the August reading of the Ifo Business Climate Index. In Hungary, market participants will be closely watching the MNB’s interest rate decision.
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