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US bank shares fell
The third-quarter earnings season in the US has picked up pace following the release of the latest figures from US banks. Based on preliminary expectations, the third quarter is likely to have closed with strong earnings growth for S&P 500 companies, led by the energy and technology sectors. The major US banks have still achieved solid growth on an annual basis, indicating that their operations remain strong, but the pace has clearly slowed in many cases, which has tended to result in negative share price reactions.
Commodities - Technical Analysis
Gold and silver continued their downward trend, bouncing off key levels. Until their downward trends are broken, they will not be able to produce a significant rise. The fall in oil prices reversed from the $87.5 level and began a slight upward movement. Natural gas remained in an uptrend; a significant rise could even occur if it breaks out upwards. The price of copper has become stuck in a wider range, so the oversold and overbought zones may offer more favourable trading opportunities. The falling prices of wheat and corn have reached key support levels; a buying reaction from these levels could present favourable long opportunities with limited risk.
In order to achieve diversification in terms of currency, government bonds denominated in euros and dollars in the region — particularly Hungarian and Romanian bonds — offer attractive returns with acceptable — albeit increasing — risks.
Euro or dollar bonds issued by companies in the region (including Turkish issuances more broadly) still offer a yield premium over similar-rated bonds issued by companies in Europe or the US, while the risk profile of the former is similar or better.
Euro-Denominated Corporate Bonds
Yields on corporate bonds issued in euros have fallen steadily over the past three months as risk appetite has improved. This makes it particularly difficult to find corporate bonds that still offer meaningful yields at acceptable risk levels.
Dollar-Denominated Corporate Bonds
Companies in the region typically issue bonds in euros, with a much narrower list available in dollars. For this reason, the list includes two MREL bonds issued in recent years that are linked to OTP, of which the 2027 senior preferred is ranked higher than the longer-maturity 2033 subordinated paper. In both cases, there is the possibility to call the bonds earlier, in which case the resulting yield potential is much more limited.
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