OTP Morning Brief: Markets resume growth as tensions ease
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OTP Morning Brief: The S&P pulled back from its record high on Friday, but ended the week in positive territory
European stocks closed slightly lower on Friday, snapping a four-week winning streak. The BUX presented a much more positive picture in terms of its weekly performance. The eurozone economy expanded by 0.4% quarter-on-quarter in Q2, supported by Spain’s outstanding performance. Major US indices also closed lower on Friday, but the week was largely positive overall. Investor sentiment continued to be weighed down by uncertainty in the Middle East and elevated oil prices. US Treasury yields rose and the dollar weakened following weaker-than-expected retail sales data. Japan's Q2 GDP growth fell short of expectations, while Asian equity markets moved higher. August purchasing managers' indices are due for release this week.
OTP Morning Brief: US rate cut expectations declined further despite the favorable producer price index data
The favorable July producer price index data led to a further decline in US rate cut expectations on Thursday. Markets are now pricing in a Fed rate cut only in December. Declining rate cut expectations provided a boost to US equities, with the technology-heavy Nasdaq posting the strongest gains among the major indices. Sandisk shares surged 13.7%. In Europe, major stock indices moved only modestly, with the STOXX 600 remaining broadly flat. The favorable US CPI data led to a decline in developed market government bond yields. Today, the second estimate of eurozone Q2 GDP is due for release, while additional July retail sales data will be published in the US.
Europe’s stocks rose on Donald Trump's backtracking, the CEE region had a bright trading day. The easing of tensions helped US markets climb higher, the November gauge of consumer prices was in line with expectations. European bond market calmed down after Donald Trump's speech. The HUF’s strengthening drove the EUR/HUF to 382.5. Bank of Japan left its key interest rate unchanged. PMIs and Russia-Ukraine-USA negotiations will be the main focus today?.
European stocks picked up after Donald Trump's backtracking, CEE markets saw upbeat trading
In Europe, stocks recovered sharply after Donald Trump backtracked on Greenland by rejecting military action and abandoning tariffs on European countries. This came after the US President held talks with NATO Secretary General Mark Rutte and said a deal was starting to take shape, which would build on a previous agreement from 1951 between Denmark and the USA. The Stoxx 600 jumped 1%, as Germany's DAX (+1.2%) and France's CAC40 (+1%) grew. The clear winner of the day was the automotive sector, which advanced 2.2%, mainly thanks to a 6.5% rebound in Volkswagen as Europe's largest carmaker reported better-than-expected net cash flow for 2025. The banking and telecommunications sectors both soared 2%. The latter benefited from the 7% surge in Norway’s Telenor, following the sale of its Thai subsidiary. In the eurozone, the consumer confidence index rose to -12.4 points in January, exceeding the -12.9 forecast and the previous month’s reading of -13.2 points.
The sentiment was also remarkable in the CEE region, where Czechia’s TX (+2.0%), Poland’s WIG (+2.4%), and Hungary’s BUX (+3.2%) all excelled. The latter was fuelled by MOL’s 5.9% jump, but the other three blue chips also posted impressive gains, with Richter surging 2.9%, MTelekom growing by 2.5%, and OTP soaring 2.4%; the banking share closed at an all-time high again.
US markets rose further as tensions eased, November’s PCE was in line with expectations
Donald Trump's softer rhetoric was also appreciated by US investors: America’s stock markets increased for the second day in a row, with the S&P500 and Dow closing 0.5% higher and the Nasdaq gaining 0.9%. Procter & Gamble shares grew by 2.6% after the release of quarterly results, while Intel, which reported after the close, upped 0.1% before plunging 7% in after-hours trading as its revenue fell short of investors' expectations because it failed to keep up with demand for chips used in servers. Abbott nose-dived 10%, in its biggest single-day drop since 2002, after the medical technology company forecast weaker-than-expected quarterly profit. GE Aerospace slumped 7.4%, even though the company raised its full-year profit forecast higher than the consensus thought. All Magnificent Seven shares grew, particularly Meta (+5.7%) and Tesla (+4.2%).
Several macroeconomic data were released on Thursday. The 0.2% monthly change in the core PCE inflation, an index closely watched by the Federal Reserve, was in line with both analysts’ forecasts and the previous month’s figure, indicating some stability in US prices. US consumer spending also rose 0.5% in November, as expected; this may contribute to the US economy’s performance in the fourth quarter. At the same time, personal income data showed 0.3% monthly increase, slightly below the 0.4% rate projected by analysts. Weekly jobless claims rose slightly to 200,000, but fell short of analysts' forecasts. Oil prices slipped nearly 2%, hitting a weekly low, on news suggesting de-escalation.
Europe’s bond markets calmed after Donald Trump’s speech; the forint strengthened to 382.5 against the euro
Following Donald Trump's Wednesday speech, Europe’s bond markets saw a calm trading day on Thursday, with no significant or clear movement in bond yields. France’s 10Y government bond yield sank, that of Italy rose, and the German yield was flat, the latter remained slightly below 2.9%, near the upper edge of its post-covid trading range. In the USA, the ten-year yield rose due to the revision of third-quarter GDP growth from 4.3% to 4.4%; the yield surpassed 4.25% again. As tensions eased, the euro regained some ground from the dollar, driving the EUR/USD higher, towards 1.173.
The forint appreciated by almost 0.5% against the euro, to 382.5. There was particularly strong demand at the ÁKK's auction of 3Y, 5Y, and 10Y bond yesterday, when the agency offered a total of HUF 70 billion debt, bids exceeded HUF 250 billion. The ÁKK sold nearly HUF 140 billion worth of securities, with average yields a few basis points below Wednesday's benchmark yields. Ultimately, benchmark bond yields eased by 2-4 basis points, with the ten-year yield sinking below 6.7%.
Today’s highlights
Today, the Bank of Japan raised its growth forecast and maintained forecast for higher inflation, but left its key interest rates unchanged. Meanwhile, Japan’s inflation data for December showed an annual price increase of 2.1%, down from 2.9% in November, the lowest since March 2022, mainly due to falling energy prices. Core inflation was 2.4%. The Nikkei rose 0.3% on the news, but most Asian markets also benefited from the easing of global tensions.
Today’s important publications include the HOCB and S&P purchasing managers' indices for the eurozone, the United Kingdom, and the USA. Hungary releases wage and unemployment statistics.
On the geopolitical scene, the first trilateral meeting of representatives of Russia, Ukraine, and the USA may take place in Abu Dhabi. The summit was announced by President Zelensky in Davos, and it is expected to last from Friday to Saturday, even though Russia has not yet officially confirmed its participation.
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