OTP Morning Brief: Investor sentiment improved ahead of the Fed decision; strong corporate earnings supported markets
Related content
OTP Morning Brief: News of Anthropic's potential stock market debut drove the rally in the technology sector
Major European and US equity indices moved higher. In Europe, the defence sector led the gains, while technology stocks spearheaded the rally in the US. Anthropic submitted documentation for its stock market listing, putting the spotlight back on AI investment spending. Saudi Arabia and Iran held talks aimed at easing tensions between the two countries, while crude oil prices edged lower. There was little movement in developed bond markets, with investors focusing on the ECB's and the Fed's interest rate decisions due later this week. The US dollar extended its gains against the euro. The BUX climbed by more than 1% yesterday. The Hungarian forint continued to weaken against the major currencies. The earnings season continues today with major names such as Coca-Cola and Boeing reporting results.
OTP Morning Brief: Oil and gas prices hit multi-year highs as equity markets slide
By the end of last week, oil prices had climbed to their highest levels since spring, while European natural gas prices approached levels last seen in late 2022, driven by escalating tensions in the Middle East. Equity markets also turned lower by the end of the week: while the energy sector benefited from higher commodity prices and soared to record highs, all other sectors came under pressure. In the bond market, the US 10-year Treasury yield dipped back below 5%, while its German counterpart closed at a one-and-a-half-month low. French, Mediterranean, and CEE bond yields showed little movement on Friday, but over the course of the week they rose noticeably overall.
Strong corporate earnings and optimism surrounding the technology sector supported equity markets on both sides of the Atlantic. In Europe, the STOXX 600 rose 0.5%, while in the US the S&P 500 gained 0.6%, with the Nasdaq closing 1.2% higher. The BUX gained 1.9%, driven primarily by the strong performance of OTP. In bond markets, short-term US Treasury yields edged higher, while yields declined across Europe. The Hungarian forint traded steadily, while today’s focus will be on the Fed’s interest rate decision, along with earnings reports from Microsoft, Alphabet, Meta Platforms, UBS, Deutsche Börse and Mercedes-Benz.
Earnings season and easing oil prices improved sentiment in Europe
Investor sentiment improved across European equity markets, supported by strong corporate earnings and lower oil prices. The pan-European STOXX 600 rose 0.5%, with the technology and mining sectors outperforming. Among the top gainers were Besi and AT&S, with the former benefiting from Applied Materials’ announcement of an increased stake in the company. Company-specific news from Novartis also supported sentiment after the drugmaker raised its full-year operating profit guidance despite significant one-off write-downs. However, sentiment was partly weighed down by HSBC’s weak revenue performance.
Major Western European indices closed mixed. The DAX gained 0.7% and the CAC 40 rose 0.5%, while the FTSE 100 fell 0.8%, weighed down by HSBC’s sharp decline. Markets remain focused on Thursday’s ECB rate decision and the central bank’s accompanying communication.
Regional equity markets performed strongly, with the BUX rising 1.9% to its highest level in nearly a month, while Poland’s WIG20 gained 1.0% and the Czech PX Index advanced 1.5% compared with the previous day’s close.
Most domestic blue chips posted strong gains, providing meaningful support to the BUX. OTP surged 3.5%, Magyar Telekom rose 2.6%, and MOL closed 1.0% higher, while Richter edged down 0.1%.
AI optimism and strong earnings supported Wall Street
Among the major US indices, gains in technology stocks primarily lifted the Nasdaq, which rose 1.2%, while the S&P 500 advanced 0.6%; the Dow, meanwhile, closed virtually unchanged. News surrounding Anthropic’s upcoming IPO provided fresh momentum for the semiconductor sector, while investors also welcomed expectations ahead of the Fed meeting that policymakers would leave the benchmark interest rate unchanged. Among sectors, technology was the strongest performer, whereas energy lagged amid a pullback in oil prices.
Among company-specific developments, the deepening partnership between Nvidia and Meta stood out, with Nvidia making a $3 billion investment as part of Meta’s capital raise. Coca-Cola raised its full-year earnings guidance after demand for its zero-sugar beverages and premium products remained strong, with both revenue and earnings exceeding expectations. Visa reported stronger-than-expected profit growth, supported by resilient consumer demand and continued strength in travel and services spending. UPS and Royal Caribbean also upgraded their full-year outlooks, while Boeing fell 10.7% after reporting a larger-than-expected quarterly loss and signaling a slower production ramp-up for its 737 program.
Geopolitical developments also remained in focus for investors. In Israel, election exit polls pointed to a political deadlock, raising the prospect of prolonged coalition negotiations or even another election. Meanwhile, markets continued to monitor the conflict in the Middle East and its implications for commodity markets. In Latin America, the spotlight remained on Luiz Inácio Lula da Silva’s re-election and the question of how Brazil will balance its geopolitical relationships with China and the US.
Macroeconomic data painted a mixed picture. The Conference Board’s consumer confidence index rose to 91.7, significantly exceeding expectations and pointing to a meaningful improvement in household sentiment. However, while headline durable goods orders increased by 1.8% in September, measures excluding the more volatile transportation components painted a weaker picture. In the housing market, new home sales declined on a monthly basis, while house price data also signaled a monthly contraction. Overall, the data did not indicate a meaningful economic slowdown, but continued to send mixed signals about the underlying strength of the economy.
US short-term yields edged higher, German bond yields declined, while the Hungarian forint remained stable
US Treasury markets saw mixed moves ahead of the Fed’s rate decision. The 2-year yield rose 3 basis points to 4.74%, while the 10-year yield closed unchanged at 4.99%. A stronger-than-expected increase in the Conference Board consumer confidence index exerted modest upward pressure on short-term yields, while investors continued to price in the possibility of further Fed action later this year. Markets still overwhelmingly expect policymakers to leave interest rates unchanged at this meeting, although the prospect of an additional rate hike before year-end has not been fully ruled out. Investors also remain focused on longer-term inflation risks, the sizeable fiscal deficit, and the financing needs generated by ongoing AI-related investment.
In Europe, bond yields declined, with the German 2-year yield falling 3 basis points to 3.05%. Investors are now focused on Thursday’s ECB rate decision, where the benchmark interest rate is widely expected to remain unchanged. At the same time, developments in the Middle East continued to be a key driver of market sentiment. Oil prices corrected on Tuesday as diplomatic discussions involving Iran continued, with Brent settling at $113.88 per barrel and WTI closing at $99.90 per barrel. The EUR/USD exchange rate stood at 1.1124, while the US dollar was broadly unchanged against major currencies.
International bond market trends were also reflected in the Hungarian government bond market, where yields generally moved lower across the curve. Moves at the short end were modest, while yields declined more noticeably in the longer-tenor segment, with the 10-year benchmark yield falling 6 basis points to 5.69%. The Hungarian forint remained stable, trading around 366.73 against the euro and 329.72 versus the US dollar.
Today's highlights
AI-driven optimism also supported Asian equity markets, particularly the technology sector. Following strong earnings from South Korea’s SK Hynix, Japan’s Nikkei rose 1.3% and China’s CSI 300 gained 0.7%, while regional stock markets broadly traded in positive territory.
In India, telecom operator Reliance Jio soared 21% on its stock market debut following the country’s largest-ever IPO. As a result, the company reached a market valuation of approximately $131.5 billion, making it India’s second-largest listed company by market capitalization.
Alongside the Fed’s rate decision, investors will be closely watching corporate earnings releases today. In the US, Microsoft, Alphabet and, after the market close, Meta Platforms are scheduled to report, while in Europe UBS, Deutsche Börse and Mercedes-Benz will publish their quarterly results during the trading session.
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