OTP Morning Brief: Escalation continued in the Middle East
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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.
Escalation in the Middle East continued, with the Houthis now targeting Saudi facilities, pushing Brent crude prices close to $100 and intensifying global CPI concerns. Despite this, European equity indices showed only minimal movement, while the major US stock indices started the week in negative territory. German exports came in weaker than expected. Hungarian CPI was 1.3% year-on-year in August. Hungary’s budget deficit exceeded HUF 2,000 billion in August, although the figure was distorted by the pre-financing of the RRF program. US and Hungarian bond yields rose, German yields declined, while the forint remained largely unchanged. Today, attention is likely to focus on French industrial data and the Polish interest rate decision.
Major European indices barely moved on Tuesday, while Hungarian CPI stood at 1.3% in August
European markets were largely flat on Tuesday, with the Stoxx 600 and the DAX remaining close to unchanged. The CAC 40 posted a slight gain, while the FTSE 100 recorded a negligible loss. Investors stayed cautious as oil prices continued to rise. Among sectors, materials outperformed with a 2% advance, supported by higher copper prices, while healthcare lagged behind with a 2.3% decline. The sector's weakness was partly driven by a 10.9% drop in Novartis shares after the company's experimental treatment for muscular atrophy failed a Phase III clinical trial, marking its second major R&D setback within days. Notable gainers during the session included Rheinmetall (+3.2%), Volkswagen (+2.6%), which extended its post-restructuring rally, and Anglo American (+2.8%), benefiting from higher commodity prices.
Germany's exports fell by 0.8% month-on-month in July 2026, undershooting market expectations for a slight increase. Weaker exports to the euro area and China more than offset stronger shipments to the US. On an annual basis, however, exports rose by 6.1%.
The CEE region delivered a mixed performance, with Poland's WIG20 outperforming after gaining 1.3%, while Hungary's BUX advanced 1.0% and the Czech PX closed the session down 0.5%. The Hungarian index was supported primarily by OTP (+1.5%) and MOL (+1.6%). Hungarian CPI came in at 1.3% year-on-year in August, slightly below our 1.4% forecast. At the same time, core CPI, which better captures underlying price trends, exceeded expectations. This was partly driven by stronger-than-expected increases in market service prices, likely reflecting the expiry of voluntary fee reductions by financial service providers last month. In contrast, regulated prices rose less than anticipated.
Tensions in the Middle East intensified further, while major US indices closed in negative territory
Major US indices moved lower as escalating tensions in the Middle East pushed oil prices higher and reinforced CPI concerns. The already intense conflict worsened further on Tuesday after the Iran-backed Houthi movement in Yemen targeted Saudi energy facilities, setting oil infrastructure ablaze and raising the risk of a significant expansion of the six-month-long war in the Middle East. Additional developments emerged overnight after the market close, with reports indicating that Iran had attacked a US military base in Jordan, although Jordanian authorities stated the strike was unsuccessful, while the US destroyed five Iranian oil tankers.
The Dow fell 1.2%, while the S&P 500 and Nasdaq declined 0.6% and 0.3%, respectively, on the first trading day following Labour Day. The S&P software index dropped 1.4% amid renewed concerns that OpenAI’s new Astra model could replace specialized software applications, weighing on shares of companies such as Salesforce (-3.9%) and ServiceNow (-5.0%). Intel surged 9.0% and Qualcomm gained 3.2% after reaching an agreement with Amazon to develop custom AI chips. Apple shares slipped 1.2% ahead of the company’s event, where it is expected to unveil its latest smartphone under the leadership of new CEO John Ternus. Cryptocurrency-related stocks moved lower after Bitcoin pulled back from the $80,000 level, with Coinbase losing 3.1% and Strategy falling 4.4%.
Gradual escalation continued to lift oil prices, with Brent crude futures rising 0.9% to settle at $97.92 per barrel on Tuesday, while WTI gained 1.7%, ending the session at $93.03 per barrel.
Developed market yields moved in opposite directions, while RRF pre-financing weighed on Hungary’s fiscal balance in August
US Treasury yields edged higher on Tuesday, with the two-year yield reaching 4.40% and the 10-year yield rising to 4.794%, narrowing the spread between them to 40 basis points. As energy prices continued to rise gradually, investors focused on Friday’s CPI release, which could prove decisive for the outcome of the September rate decision. Meanwhile, German Bund yields retreated from their previous 15-year highs as European investors assessed not only global challenges but also the uncertain political situation in Germany. At the same time, markets widely expect the ECB to deliver another rate hike at Thursday’s policy meeting. The euro was little changed against the dollar on Tuesday.
Hungarian government bond yields resumed their upward trend, rising by 4 to 6 basis points across the curve. Fiscal sustainability has remained a key driver of heightened market volatility in recent months, with the central government budget posting a deficit of HUF 2,311.2 billion in August. The sharp deterioration compared to the previous month was largely attributable to the pre-financing of RRF programs, which worsened the fiscal balance by HUF 2,186.9 billion. Hungary’s debt management agency (AKK) offered HUF 30 billion of discount treasury bills and accepted HUF 25 billion at an average yield of 5.24%. The forint weakened slightly against the euro, trading near 363.8 by the end of the session.
Today's highlights
Asian markets delivered a mixed performance amid rising geopolitical tensions and higher oil prices. China’s SSE Composite fell 0.2%, while Hong Kong’s Hang Seng declined 0.4%. In Japan and South Korea, however, AI-related optimism outweighed negative geopolitical sentiment, lifting the Nikkei by 0.2% and the Kospi by 1.2%. Overnight, news emerged that alongside the conventional conflict, Trump also continued his trade dispute with Canada by imposing tariffs on dairy products, alcoholic beverages and automobiles, with the measures set to take effect on September 29.
Today, July industrial production data from France and the Polish interest rate decision are likely to be in focus.
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