OTP Morning Brief: Indexes rose on hopes of peace talks
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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.
European stock markets rose on hopes that negotiations could resume, while the BUX corrected after yesterday’s gains. The United States has begun a trade blockade against Iran. Stocks advanced on Wall Street as inflation fears eased. On hopes of peace, yields fell and the dollar weakened, while the forint corrected. Asian equities were in positive territory in morning trading. Today, attention will turn to euro zone industrial production.
European stock markets rose on hopes that negotiations could resume, while the BUX corrected after yesterday’s rally
Investors worldwide were reassured by signs of de-escalation in the Middle East. According to reports on Tuesday, the United States and Iran may resume negotiations after Washington took steps to impose a maritime blockade of the Strait of Hormuz. Consultations are currently under way on holding another round of talks before the expiry of the two-week ceasefire, with reports suggesting that the discussions could take place in Pakistan. Meanwhile, several tanker ships linked to Iran have passed through the strait, which is now also blocked by the U.S.; however, these vessels did not dock in Iran and therefore were likely not subject to the blockade targeting Iran’s foreign trade.
On the back of the positive news, major European indexes closed higher, with the DAX up 1.3%, the CAC 40 gaining 1.1% and the FTSE rising 0.2%, lifting the pan-European STOXX 600 by 1.0% by the end of the session. Gains were led by the media (+2.4%), travel (+2.1%) and banking (+2.0%) sectors, while the energy sector slipped 1.5% on the back of lower oil prices. Meanwhile, the personal and household goods sector edged down 0.1%, with shares of LVMH easing slightly after the luxury group said the Iran war had reduced group-wide sales by at least 1% in the past quarter due to weaker spending in the Gulf region. Shares of Imperial Brands plunged around 4.8% after the Davidoff cigarette maker warned that the impact of the Middle East conflict could disrupt its performance in the second half.
Sentiment was also positive across the CEE region, with both the PX and the WIG 20 rising 1.1%. The BUX, however, underwent a mild correction after Monday’s rally, slipping 0.4%. The decline was driven in part by losses in OTP (-1.7%), Magyar Telekom (-1.4%) and Richter (-0.2%), while MOL gained 0.5% to reach a new high. Beyond the oil company, a stronger positive correction was seen in stocks that had fallen sharply on election-related news, with Opus jumping 21.3% and 4iG climbing 10.0% on Tuesday.
Stocks rose on Wall Street, inflation fears eased
Wall Street indexes extended their gains on Tuesday, with the Nasdaq rising 2.0%, the S&P 500 adding 1.2% and the Dow climbing 0.7%. Of the S&P 500’s 11 major sectors, only three closed in negative territory, led lower by the energy sector, which fell 2.2%. Within technology, software stocks advanced for a second consecutive session, ending the day up 1.6%, while the Philadelphia Semiconductor Index gained 2%, marking its fifth straight record close. On the earnings front, shares of BlackRock rose 3% after the asset manager reported an increase in first-quarter profit, supported by strong inflows into ETFs and a sharp rise in performance fees. Citigroup shares closed up 2.6% after its first-quarter results topped analysts’ expectations. By contrast, JPMorgan’s first-quarter earnings received a more muted market reaction, while Wells Fargo shares declined after net interest income fell short of expectations. In the airline sector, United Airlines gained 2%, while American Airlines shares surged 8% following unconfirmed internal sources about a potential merger between the two companies.
The positive sentiment was further supported by data from the U.S. Bureau of Labor Statistics showing that the producer price index (PPI) rose by 0.5% month on month and 4.0% year on year in March, well below the market consensus of 1.1% and 4.6%, respectively. Core PPI increased by 0.1% on a monthly basis and by 3.8% year on year. Similar to the March CPI figures published last Friday, the PPI release indicated that the surge in oil prices linked to the Iran war had a significant impact on headline inflation measures, while its effect on core inflation was more limited. On Tuesday, the International Monetary Fund (IMF) downgraded its growth outlook due to the energy price shock and supply disruptions triggered by the Iran war, warning that the global economy could be pushed to the brink of recession if the conflict were to escalate and oil prices were to remain sustainably above $100 per barrel through 2027. The IMF’s most optimistic, so-called baseline scenario in its World Economic Outlook assumes a short-lived Iran war and projects global real GDP growth of 3.1% in 2026, which is 0.2 percentage points lower than its January forecast.
On the back of positive war-related news, oil prices declined again, with Brent futures falling 4.6% and slipping back below the $100-per-barrel mark, while WTI dropped 7.9%. Meanwhile, the International Energy Agency (IEA) said the conflict could wipe out global oil demand growth this year, which would mark the first annual decline since the pandemic, adding that prices do not necessarily yet reflect the full extent of lost capacity. The war has significantly damaged energy infrastructure and severely disrupted traffic through the Strait of Hormuz, with an OPEC+ report estimating that production fell by 7.9 million barrels per day in March.
Yields fell on hopes of peace, while the dollar weakened
Confidence in the resumption of peace talks pushed energy prices down by 5–7% yesterday. In line with this, bond yields declined across developed markets, with the U.S. 10-year falling by 4 basis points to around 4.25%, while the German 10-year dropped 6 basis points, moving closer to 3%. The dollar continued to weaken, slipping 0.3% against the euro, with EUR/USD approaching the 1.18 level.
The forint slightly corrected after Monday’s strong post-election rally, easing from levels last seen before the war in Ukraine to above 363.5. Bond yields continued to fall, by around 10 basis points. The reference yield curve flattened significantly, with most benchmark tenors – including the 10-year – clustered around the 6.15% level. At the Government Debt Management Agency’s auction of three-month treasury bills, HUF 40 billion worth of securities were sold amid solid demand, at an average yield of 6.15%.
Today's highlights
Trading in Asia was also positive, with the Nikkei up 0.9%, the SSEC gaining 0.3% and the Kospi rising 2.2%.
Today, attention will focus on euro zone industrial production data for February and the New York Fed’s manufacturing index, as well as the Fed’s Beige Book based on reports from its regional banks. In addition, companies such as ASML, Bank of America and Morgan Stanley are set to report earnings.
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