OTP Morning Brief: Major stock indices mostly advanced; crude oil prices eased
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OTP Morning Brief: Stocks advanced, long-term yields continued to climb, while eurozone inflation came in unexpectedly high
European and US equity markets both closed higher on Friday, including the Hungarian stock exchange, despite what had otherwise been a particularly weak week for the market. Bond markets showed a more divergent picture across countries, with long-term yields rising in the US, Japan and France, while they edged lower in Germany and across the CEE region. An unexpectedly high inflation reading was reported in the eurozone: headline CPI rose by 3.8% year-on-year in September, well above both the 3.6% market consensus and August’s 3.2% reading. This could further fuel expectations of additional rate hikes in Europe. In the US, however, labour market data showed a slight deterioration, making an October Fed rate hike appear even less likely.
OTP Morning Brief: Developed market bond yields eased following remarks from Fed policymakers
Leading Western European indices fell by more than 1% on Thursday. Wall Street indices posted modest gains. The energy and technology sectors were the day's top performers. Bond yields declined following a volatile trading session. Fed policymakers called for patience regarding further rate hikes. The probability of an October rate hike fell below 25% in market pricing. The dollar continued to strengthen against the euro. The Hungarian Central Statistical Office (KSH) reported a budget deficit of 3.3% in Q2. The September Manufacturing PMI reinforced the positive turnaround trend in the Hungarian industrial sector. Today, investors will pay close attention to the euro area's September CPI data and US labour market releases.
Investor sentiment improved across global equity markets on Monday. The STOXX 600 gained 0.4%, while the NASDAQ closed at a new all-time high. CEE equity markets also moved higher, with the BUX gaining 1.3%. Long-term bond yields continued to rise, with the US 10-year Treasury yield increasing to 5.31%. The Hungarian 10-year government bond yield rose by 5 basis points to 5.75%. The US dollar strengthened against the euro, while oil prices eased. Domestic and eurozone business sentiment indicators are due to be released today.
Major European indices mostly moved higher
Major European indices mostly moved higher on Monday, with the exception of France’s CAC 40. The pan-European STOXX 600 gained 0.4%, led by advances in the mining and banking sectors, which were among the strongest-performing industry groups. The French market underperformed, weighed down by a 10% drop in Schneider Electric shares after investors reacted negatively to the company’s planned USD 22.6 billion acquisition of US-based PTC (+33.5%). Concerns over a nationwide wave of protests, as well as growing worries about the sustainability of France’s fiscal and debt trajectory, also contributed to the weaker performance of the French equity market.
CEE equity markets moved higher, with the WIG20 gaining 1.7%, the PX50 advancing 0.8%, and the BUX rising 1.3%. The strong performance of the Hungarian market was supported by all major blue-chip stocks: OTP gained 1.1%, MOL advanced 2.6%, Magyar Telekom climbed 2.3%, while Richter added 0.6%.
Producer price inflation in the euro area accelerated further in August. The producer price index rose by 1.9% month-on-month, following a 1.6% increase in July, while annual producer price inflation climbed to 8.2% from 5.8% in the previous month, marking its highest level since February 2023. The increase was driven primarily by higher energy prices.
At the same time, investor sentiment in the euro area deteriorated, with the October Sentix index falling to 2.7 points from 5.1 points in September, missing market expectations. The decline was driven primarily by a worsening assessment of the economic outlook, while perceptions of current conditions remained broadly unchanged.
In Hungary, the budget deficit narrowed to HUF 92.8 billion in September following the exceptionally high shortfall recorded in August. Over the first nine months of the year, the cumulative deficit reached HUF 5,262 billion.
The NASDAQ reached a new record high; crude oil prices eased
Investor sentiment continued to be shaped by geopolitical developments and expectations regarding monetary policy. While risks related to the Middle East conflict remain a key factor, investors are increasingly turning their attention to the upcoming earnings season and the Fed’s expected policy moves.
Easing oil prices and softer expectations for further rate hikes supported risk appetite yesterday, helping Wall Street’s major indices close higher. S&P sector indices delivered a broadly positive performance, including technology stocks, which helped lift the NASDAQ by 1.1% to a new record high. Materials and energy were also among the best-performing sectors.
Among the major technology companies, Nvidia gained 2.1%, Microsoft advanced 1.5%, Meta rose 1.9%, while Tesla climbed 2.2%. On the corporate front, RXO surged 22.5% following a takeover offer, while shares of the acquiring company, C.H. Robinson, fell 11%.
Among the latest data releases, the ISM Services PMI was worth highlighting. The index eased to 54.9 in September from 55.4 in August, remaining above the 50-point threshold that signals expansion for the 27th consecutive month. Growth in services activity and new orders moderated, while the employment component returned to expansion territory and the prices index remained elevated.
Brent and WTI crude oil prices eased yesterday. Several factors contributed to the decline: OPEC+ decided to leave its November production targets unchanged, G7 countries agreed to release 100 million barrels from their strategic oil and fuel reserves, Saudi Aramco unexpectedly cut its official selling prices for November deliveries to Asia, and shipping and export data indicated that traffic through the Strait of Hormuz is recovering and approaching pre-war levels.
US and German bond yields moved higher; the dollar strengthened against the euro
In the US, the long end of the yield curve moved higher. The 2-year Treasury yield closed unchanged at 4.83%, while the benchmark 10-year yield rose by 3 basis points to 5.31%. Long-term yields continue to face upward pressure from concerns over fiscal sustainability, an unsustainable debt trajectory, and inflation remaining elevated for an extended period.
In Europe, bond yields edged higher, with the German 10-year yield rising by 1 basis point to 3.5%. In the foreign exchange market, the euro weakened against the US dollar, with the EUR/USD exchange rate trading near 1.122. The euro’s decline was driven by concerns over France’s fiscal position, as well as the persistently elevated US yield environment.
The rise in global yields was also felt in the Hungarian market. Yields moved higher across the longer end of the domestic yield curve, with the Hungarian 10-year government bond yield rising to 5.75%. The forint was broadly unchanged against the major currencies, with the euro trading at 367.21 and the US dollar at 327.37.
Today's highlights
Asian markets opened higher on Tuesday morning, with Japan’s Nikkei gaining 0.8%, while the MSCI Asia Pacific ex-Japan Index advanced 0.2%. In the oil market, Brent crude stabilized at around USD 100 per barrel after falling nearly 2% on Monday.
Hungary’s Central Statistical Office (KSH) is set to release August industrial production and retail sales data today. Germany will publish its industrial orders figures, while France is due to report industrial production data. In the euro area, August retail sales figures are scheduled for release.
The Government Debt Management Agency (ÁKK) will offer HUF 30 billion worth of three-month discount Treasury bills at its auction today.
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