While global markets, excluding Europe, followed a buying trend in a week in which the verbal guidance of the US Federal Reserve (Fed) officials came to the fore, all eyes turned to the inflation data to be announced in the US.
Last week, an atmosphere in which Fed officials emphasized their determination to fight inflation stood out in global markets. Messages that an effective struggle process could be followed without the need for an interest rate increase caused the stock markets to be predominantly buying.
While it is still questioned whether the steps taken to combat inflation around the world are sufficient, a significant volatility in asset prices continues. Inflation concerns of central banks make uncertainties stronger in the markets.
The tone of Fed Chairman Jerome Powell’s statements showed a “hawkish” stance beyond expectations. Powell stated that it is not yet certain that a restrictive monetary policy will be implemented that will reduce inflation to the 2 percent target, and that they will not hesitate to tighten their policies further if necessary.
Emphasizing that there is still a long way to go in reducing inflation to 2 percent in a sustainable manner, Powell announced that economic growth was strong in the third quarter, but they expect it to slow down in the coming quarters.
While a similar tone is followed in other statements by Fed officials, it is stated that the full effect of the interest rate increases has not yet been seen. In addition, opinions come to the fore that more time is needed to reduce inflation to the target.
When the demand for the bond issue by the US Treasury was below expectations, the US 30-year bond interest rate increased by 7 basis points to 4.76 percent. The US 10-year bond rate increased by approximately 9 basis points to 4.60 percent.
While the volatility in commodity prices continued, the barrel price of Brent oil completed the week with a decrease of 4.2 percent at $81.4. While the price of gold per ounce decreased by 2.8 percent and closed the week at $1,938, the cryptocurrency Bitcoin tested the peak of the last 18 months at $37,972.
While European stock markets followed a sales-oriented trend last week, macroeconomic data in the region continues to give mixed signals.
In the Eurozone, the Producer Price Index (PPI) increased by 0.5 percent on a monthly basis in September, but decreased by 12.4 percent on an annual basis. Industrial production in Germany decreased by 1.4 percent monthly. The service sector and composite Purchasing Managers Index (PMI) across Europe were 47.8 and 46.5 respectively, indicating that the contraction continues. However, factory orders in Germany increased by 0.2 percent in September, contrary to expectations.
While retail sales in the region decreased by 0.3 percent in September compared to the previous month, inflation in Germany in October fell to 3.8 percent, its lowest level since August 2021.
According to the European Central Bank’s (ECB) Consumer Expectations Survey, consumers’ inflation expectations for the next 12 months increased from 3.5 percent to 4 percent. While ECB members continued their verbal guidance, ECB member Robert Holzmann stated that they should be ready to increase interest rates if necessary. ECB Chief Economist Philip Lane stated that they are focused on keeping policy rates here for a while.
The UK economy did not grow in the third quarter, making it the economy’s weakest quarterly performance this year. Bank of England Governor Andrew Bailey emphasized that monetary policy is tight and will remain tight for a long time until inflation falls to its target, and stated that the issue of interest rate reduction is not on their agenda yet.
Last week, the DAX index in Germany gained 0.30 percent in value, while the CAC 40 index in France lost 0.03 percent, the MIB 30 index in Italy lost 0.65 percent and the FTSE 100 index in England lost 0.77 percent.
Current account balance in Germany next week, ZEW economic confidence index in Germany on Tuesday, growth in the Eurozone, CPI in the UK on Wednesday, European Central Bank (ECB) President Christine Lagarde’s speech on Thursday, Eurozone on Friday CPI data will be followed in .
Last week, a generally buying trend was observed in Asian markets, except for Hong Kong.
Although concerns about real estate companies in China continue, positive news flow for a few companies has a positive impact on asset prices. The removal of short selling in South Korea until June 2024 supported the country’s markets.
Bank of Japan (BoJ) Governor Kazuo Ueda stated that they do not have to wait for real wage increases to turn positive to end ultra-loose monetary policies. This has led to speculation that the bank may abandon its dovish policies a little earlier than expected. According to the BOJ’s meeting summary, some officials suggested that they start giving messages about abandoning the low interest rate policy.
According to data announced in China, exports did not meet expectations and decreased by 6.4 percent last month, while imports increased by 3 percent. Zhang Qingsong, Deputy Governor of the Central Bank of China, stated that there are economic programs designed for the Chinese economy. However, in China, CPI decreased by 0.2 percent monthly and 2.7 percent annually in October, raising deflation concerns.
Analysts predict that concerns about the Chinese economy are increasing and this may force the People’s Bank of China (PBoC) to take dovish steps in monetary policy. Predictions that PBoC will reduce the 1-year borrowing rate by 10 basis points at the meeting to be held next week are gaining strength in the markets.
Although the IMF increased its growth forecast for the Chinese economy to 5.4 percent for this year and 4.6 percent for next year, it pointed out the weak expectations for Chinese growth in the next 5 years. Analysts state that possible steps taken by the government following the inflation data announced in China may increase volatility in the markets.
The Reserve Bank of Australia (RBA) increased the policy rate by 25 basis points to 4.35 percent. In the statement, concerns that high inflation may continue for longer than expected were emphasized.
On a weekly basis, the Hang Seng index in Hong Kong lost 2.61 percent, the Kospi index in South Korea lost 1.74 percent, the Nikkei 225 index in Japan lost 1.93 percent and the Shanghai composite index in China lost 0.27 percent. won.
Next week, important economic indicators such as PPI in Japan, industrial production and retail sales in China, and foreign trade balance in South Korea will be followed.
WHICH DATA WILL BE MONITORED DOMESTIC?
Last week, the BIST 100 index at Borsa Istanbul gained 0.85 percent and rose to 7,771.34 points. Dollar/TL completed the week at 28.5446, 0.54 percent above the previous close.
While the Central Bank of the Republic of Turkey (CBRT) removed the Summary Foreign Exchange Position Reporting, it updated the scope of the Systemic Risk Data Tracking System (SRVTS) in order to increase the company coverage and the level of representation of companies in the country’s economy.
According to Turkish Statistical Institute (TUIK) data, the industrial production index decreased by 0.1 percent on a monthly basis in September, but increased by 4 percent on an annual basis. The unemployment rate decreased by 0.1 point to 9.1 percent in September compared to the previous month.
Next week, domestic balance of payments will be followed on Monday, budget balance on Wednesday, housing sales and housing price index on Thursday, and CBRT market participants survey on Friday.
According to survey participants, the current account is expected to have a surplus of 1 billion 529 million dollars in September. In addition, participants’ current account deficit expectation for the end of 2023 varies between 43.4 and 49.4 billion dollars.