A negative trend is observed in global markets due to the risk of the conflicts in the Middle East spreading to larger regions and concerns that political interest in the USA may be kept at high levels for a longer period than expected. Next week, the focus will be on the interest rate decisions of the US Federal Reserve (Fed) and other important central banks.
The fact that the Israeli-Palestinian conflict continues despite reactions from all over the world increases the risk perception in the markets. In addition, the news flow on this issue continues to have an impact on the markets.
Analysts state that, based on the pricing in the money markets, it is certain that the Federal Reserve (Fed) will keep the policy rate constant at the range of 5.25-5.50 percent at the monetary policy committee meeting to be held next Wednesday. They also point out that the predictions that the bank will keep the interest rate constant until 2024 are still strong.
Analysts point out that the words in the meeting text that the Fed will announce after the decision are of great importance. Likewise, they predict that Fed Leader Jerome Powell’s statements after the meeting may increase volatility in the markets.
Analysts also emphasize that the most critical information, such as non-farm employment and ADP private sector employment, which have the potential to give signals about the steps the Fed will take in the future, may also affect the bank’s decisions.
They point out that, in addition to the developments in the Middle East, the macroeconomic information announced last week has increased concerns that the Fed may keep the policy rate at high levels for a longer period than expected. These data showed that the US economy has a solid foundation despite the Fed’s “hawkish” steps, which raises concerns that interest rates may continue to be kept at high levels.
The US economy performed beyond expectations, growing by 4.9 percent on an annual basis in the third quarter of this year. This was recorded as the fastest growth rate recorded since the last quarter of 2021.
Consumption expenditures within the country exceeded expectations by increasing 0.7 percent in September, but revenues remained below expectations with an increase of 0.3 percent.
The core personal consumption expenditures price index, which is used by the Federal Reserve (Fed) as an inflation indicator and does not take into account food and power prices, increased by 0.3 percent on a monthly basis and 3.7 percent on an annual basis in the same period, in line with market expectations.
In its statement regarding this information, international credit rating agency Fitch Ratings emphasized that strong consumer spending and employment growth underpin the growth of the US economy and that global bond yields have increased significantly in recent months.
On the other hand, the US 10-year bond interest rate, which reached 5.02 percent at the beginning of this week, the highest level of the last 16 years, experienced a decrease of approximately 18 basis points throughout the week and completed the week at 4.84 percent. In the same period, the dollar index closed the week at 106.6, with a 0.4 percent increase on a weekly basis.
The ongoing tensions in the Middle East continue to have a direct impact on commodity prices. Gold continued its upward trend for the third consecutive week and completed the week at $ 2,005.9 per ounce with an increase of 1.2 percent. Thus, an ounce of gold exceeded $ 2,000 for the first time in approximately 5 months.
A NEGATIVE COURSE WAS ALSO OBSERVED IN EUROPEAN STOCK EXCHANGES
Factors such as the Russia-Ukraine war still continuing and tensions in the Middle East not ending cause concerns about economic activity in Europe to increase, which reduces investors’ risk appetite. This situation creates a negative trend in European stock markets.
The week will start with important developments such as the Bank of England’s (BoE) interest rate decision and inflation information across the region. Last week, after the European Central Bank (ECB) left the three main policy rates constant, ECB President Christine Lagarde emphasized that the European economy was weak and stated that inflation was expected to remain at high levels for a long time.
During the week, economists participating in the ECB Professional Forecasters Survey predicted that Eurozone inflation could only approach the ECB’s 2 percent target in 2025. This reflects concerns that inflation will remain below target for a long time.
In addition, leading PMI (Purchasing Managers Index) data announced across Europe remained below expectations and continued to give negative signals about economic activity. This situation shows that uncertainties and difficulties in terms of economic growth continue and suppresses risk appetite in European stock markets.
Last week, the DAX index in Germany lost 0.75 percent, the CAC 40 index in France lost 0.31 percent, the MIB 30 index in Italy lost 0.25 percent and the FTSE 100 index in England lost 1.50 percent. These losses reflect the negative trend in European stock markets.
Next week, the economic calendar looks quite heavy. Growth and inflation data in Germany and consumer confidence index in the Euro Zone will be announced on Monday. Growth and inflation information in the Euro Zone will be followed on Tuesday. Manufacturing industry PMI data will be published in the UK on Wednesday.
On Thursday, unemployment rate and manufacturing industry PMI information in Germany, manufacturing industry PMI information in the Eurozone, Bank of England’s interest rate decision and President Andrew Bailey’s statements in the United Kingdom will be important. On Friday, services sector PMI in the UK and unemployment rate information in the Euro Zone will be followed. This information will provide valuable indicators of the health of the European economy and may cause activity in the markets.
ASIAN MARKETS MIXED
In Asia, China and Hong Kong stock markets are diverging positively as the Chinese government continues its steps to support the economy. Next week, all eyes will turn to the monetary policy decision of the Bank of Japan (BoJ).
Analysts state that China’s wealth fund’s purchases in the stock markets helped the risk appetite recover. In addition, the decision to reduce the stamp duty on shares in Hong Kong from 0.13 percent to 0.1 percent is also cited as a factor that increases risk appetite.
On the other hand, inflation information announced in Japan increases uncertainties regarding the decisions to be taken at the BoJ meeting to be held next week. A careful wait continues in the markets regarding the BoJ’s future policy steps.
In the week starting October 30, the economic calendar looks quite heavy. Here is some valuable economic information and events:
- Industrial production, unemployment rate and the Bank of Japan’s (BoJ) interest rate decision will be followed on Tuesday in Japan.
- On the same day, PMI (Purchasing Managers Index) information for the manufacturing industry and services in China will be announced.
- Caixin manufacturing industry PMI data will be followed in China on Wednesday.
- On Friday, China’s current account stability and Caixin services PMI information will be announced.
Last week, BIST 100 index followed a fluctuating course and completed the week at 7,662.05 points with an increase of 2.02 percent. Next week, inflation data as well as the Inflation Report of the Central Bank of the Republic of Turkey (CBRT) and the summary of the Monetary Policy Committee (PPK) meeting will be in the focus of investors.
Last week, the CBRT increased the political interest rate by 500 basis points to 35 percent, in line with expectations. In the statement made by the bank, it was emphasized that additional steps will be taken to increase the Turkish lira deposit share and strengthen the cash transfer mechanism. In addition, it was stated that the effect of price and exchange rate-related cost pressures and tax regulations on inflation has been largely completed in the recent period.
According to the declaration published in the Official Gazette, the Central Bank of the Republic of Turkey (CBRT) has taken steps to increase the share of the Turkish lira in the banking system and has also introduced ease of application for export credits and companies’ access to credit within the framework of simplification.
Dollar/TL parity completed the week at 28.1737, 0.7 percent above the previous closing.
The Capital Markets Board (CMB) approved the initial price of Tureks Turunç Madencilik İç ve Dış Ticaret’s shares and gave the green light to the first public offering of this company.
Analysts stated that technically the 7,700 and 7,900 levels of the BIST 100 index may stand out as resistance, while 7,600 and 8,400 points may stand out as support.
Valuable information and events about the economy in Turkey are on the agenda in the upcoming week. Economic confidence index on Monday, foreign trade stability on Tuesday, manufacturing industry PMI on Wednesday, inflation report and weekly money and bank statistics on Thursday, and inflation data on Friday will be among the issues to be followed carefully.
