All eyes are on inflation figures in the country – Last Minute Economic News

All eyes are on inflation figures in the country – Last Minute Economic News

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While it seems certain that the “hawkish” policy steps taken by major central banks around the world in the fight against inflation have come to an end, uncertainty continues as to when interest rate cuts will begin. This situation reduces the risk appetite in global markets.

Uncertainties regarding the timing and speed of the Fed’s interest rate cuts expected to begin this year, as well as the cautious tone of the Fed officials’ verbal guidance, helped the selling pressure in the equity markets gain strength.

Analysts stated that the fact that economic activity remains strong in the USA restricts the Fed’s policy space, and this is also reflected in the verbal guidance of Fed officials.

Atlanta Fed President Raphael Bostic stated that he expects only one interest rate cut this year, stating that we are still in the Covid-19 pandemic economy and that he expects the economy and inflation to slow down gradually.

Chicago Fed President Austan Goolsbee also stated that three interest rate cuts this year are in line with his opinion. Stating that the story does not appear to have changed fundamentally, Goolsbee stated that the progress made on inflation should be seen to be in decline.

Fed Board Member Lisa Cook stated that the Fed should take a cautious approach when lowering interest rates to give more time for inflation to slow in some parts of the economy.

Fed Board Member Christopher Waller said there was no rush to cut interest rates and that he wanted to see “at least a few more months of good inflation data” before cutting interest rates.

Following the cautious guidance of Fed officials, the probability of the Bank’s first interest rate cut in June decreased from 75 percent to 64 percent in the money markets.

With these developments, the US 10-year bond interest completed the week at 4.2050 percent, just above the previous week.

As geopolitical risks as well as expectations that the OPEC+ group may continue production cuts continued to support oil prices upwards, the barrel price of Brent oil increased by 2.1 percent to 86.8 dollars.

The ounce price of gold increased by 3.1 percent to 2 thousand 233 dollars, completing the week with a record. Markets in the USA, Europe and Hong Kong were closed for trading on Friday due to the Easter holiday.

A MIXED TRAVEL WAS OBSERVED IN THE NEW YORK STOCK EXCHANGE

The New York Stock Exchange followed a mixed course as uncertainties regarding the timing of the Fed’s interest rate cut continued following the announced macroeconomic data.

The US economy grew above expectations with 3.4 percent in the 4th quarter of 2023. While there was an upward revision in the growth data during this period, the market expectation was that the economy would grow by 3.2 percent in the last quarter.

On the other hand, the consumer confidence index measured by the University of Michigan was revised upwards in March and reached 79.4.

The number of people applying for unemployment benefits for the first time in the USA fell to 210 thousand last week, below expectations. New home sales in the country were below market expectations, decreasing by 0.3 percent on a monthly basis to 662 thousand in February.

The median sales price of new homes that went on sale in the USA last month decreased by approximately 7.6 percent on an annual basis to $400,500, recording the lowest level in 2.5 years.

Durable goods orders in the country increased by 1.4 percent on a monthly basis in February, above market expectations. The Conference Board (CB) Consumer Confidence Index decreased by 0.1 points monthly to 104.7 in March.

Personal consumption expenditures in the USA increased by 0.8 percent in February, above expectations. The core personal consumption expenditures price index, which excludes food and energy items that the Fed considers as an inflation indicator, increased by 0.3 percent on a monthly basis and 2.8 percent on an annual basis in the same period, in line with expectations.

On the other hand, international credit rating agency S&P Global, in its report on the US economy, stated that economic growth in the US is expected to be 2.5 percent in 2024, as the labor market remains solid.

The Fed published its annual audited balance sheet for last year. Accordingly, the Bank recorded its largest operating loss so far with 114.3 billion dollars.

While the interest expense for depository institutions’ reserve balances increased to 176.8 billion dollars last year, the interest expense for repo operations was 104.3 billion dollars. In addition, international credit rating agency Standard & Poor’s confirmed the long-term credit rating of the USA as “AA+” and the short-term credit rating as “A-1+”, while maintaining the credit rating outlook as “stable”.

With these developments, the Nasdaq index in the New York Stock Exchange lost 0.30 percent of its value, while the Dow Jones index gained 0.84 percent and the S&P 500 index gained 0.33 percent.

In addition, in the US stock markets, which completed the first quarter of the year, the S&P 500 index recorded its best first quarter gain since 2019, with an increase of 10.2 percent in the first 3 months. During the said period, the Dow Jones index increased by 5.6 percent, achieving its strongest first quarter performance since 2021, while the Nasdaq index increased by 9.1 percent.

Next week, on Monday, manufacturing industry Purchasing Managers Index (PMI), ISM manufacturing industry PMI, construction expenditures, Tuesday factory orders, durable goods orders, Wednesday ADP employment report, service sector PMI, ISM service sector PMI, Thursday foreign trade balance, weekly unemployment. applications, and non-agricultural employment and unemployment data will be followed on Friday.

IT WAS POSITIVE IN EUROPEAN EXCHANGES

While a positive trend was observed in European stock markets, the verbal guidance of central bank officials in the region and the macroeconomic data agenda continued to be the focus of investors.

Philip Lane, Chief Economist of the European Central Bank (ECB), stated that the ECB Governing Council has a broadening consensus on the possible interest rate cut and that his confidence that wage increases are slowing down has increased.

ECB Executive Board Member Piero Cipollone stated that waiting too long to reduce interest rates could pose a risk in the context of already weak economic growth.

ECB Governing Council Member Francois Villeroy de Galhau said that the ECB will probably start a “measured” interest rate cut this spring and that this will happen regardless of the Fed’s time frame. Francois Villeroy de Galhau stated that it is not “existentially important” if the discount in question takes place in April or June.

Analysts reported that it is unclear when the ECB and the Bank of England (BoE) will start reducing interest rates, but the possibility of the first interest rate cut of both banks at the June meeting stands out in the pricing in money markets.

On the other hand, the European Union (EU) announced that it has launched an investigation to determine whether Apple, Alphabet and Meta comply with the rules under the Digital Markets Act.

With these developments, last week the DAX index in Germany gained 1.57 percent, the MIB 30 index in Italy gained 1.13 percent, the CAC 40 index in France gained 0.66 percent, and the FTSE 100 index in the UK gained 0.27 percent.

Looking at the first quarter performances of this year, it was noted that the DAX 40 index in Germany increased by 10.4 percent. In France, the CAC 40 index gained 8.8 percent. The FTSE 100 index in England also completed the first quarter with a 2.8 percent increase.

Next week, manufacturing industry PMI in the Eurozone and Germany on Tuesday, inflation in Germany, inflation and unemployment in the Eurozone on Wednesday, service sector PMI in the Eurozone and Germany on Thursday, Producer Price Index in the Eurozone, Friday Retail sales data in the Eurozone will be announced on Tuesday.

ASIAN MARKETS WERE MAINLY ON SALES

Asian markets followed a sales-oriented trend this week.

The falling risk appetite in global equity markets also had an impact on Asian equity markets.

After Naoki Tamura, a member of the Board of Directors of the Bank of Japan (BoJ), said that supportive financial conditions would be maintained for a while and that policy changes would proceed “slowly and steadily”, the dollar/yen parity rose to the highest level of the last 34 years at 151.97.

Following these developments, BOJ President Kazuo Ueda said, “Future monetary policy decisions will depend on the economy and current price developments.” and Japanese Finance Minister Shunichi Suzuki saying, “We will take the measures we can to stabilize the exchange rate, taking into account market movements.” Following his statement, the dollar/yen parity decreased, albeit slightly, to 151.3.

In the minutes of the BoJ’s last meeting, it was seen that officials were considering being cautious in future interest rate increases.

While the Japanese parliament enacted the 112.5 trillion yen ($744 billion) budget for the 2024 fiscal year, Finance Minister Shunichi Suzuki stated that the budget aims to “overcome urgent challenges that cannot be postponed.”

On the other hand, in Japan, Tokyo Consumer Price Index (CPI) increased by 2.6 percent and core CPI by 2.4 percent on an annual basis. According to leading data in the country, industrial production remained below expectations with a monthly decrease of 0.1 percent in February, while the unemployment rate increased to 2.6 percent.

Data announced in China showed that total industrial profits in the country increased by 10.2 percent on an annual basis in January and February, while industrial profits decreased by 2.3 percent in 2023.

In addition, China applied to the World Trade Organization on the grounds that subsidies for domestic electric vehicle manufacturers to combat climate change, included in the Inflation Reduction Act passed by the USA in 2022, are against competition rules.

According to the statement made by the Chinese Ministry of Foreign Affairs, Chinese President Xi Jinping met with the delegation consisting of representatives of the US business, strategy and academic circles in the capital Beijing for the China Development Forum held at the beginning of the week.

It was reported that Xi gave the message that the USA and China should work together for a cooperation that will benefit both countries and the world, while respecting each other’s right to development.

With these developments, on a weekly basis, the Shanghai composite index in China decreased by 0.23 percent, the Kospi index in South Korea decreased by 0.05 percent, the Nikkei 225 index in Japan decreased by 1.27 percent, and the Hang Seng index in Hong Kong decreased by 0.25 percent. rose.

China’s manufacturing industry PMI will be followed next week, and the service sector PMI will be followed on Wednesday.

DOMESTIC EYES ARE TURNED TO INFLATION

Domestically, Borsa Istanbul’s BIST 100 index closed the week at 9,142.40 points, with an increase of 0.34 percent. Dollar/TL finished the week at 32.1814, 1.13 percent above the previous close.

S&P Global increased its 2024 total growth forecast for developing countries from 4.1 percent to 4.2 percent, and for Turkey from 2.4 percent to 3 percent.

Next week, manufacturing industry PMI data will be followed on Monday, inflation on Wednesday, real effective exchange rate on Thursday, and treasury cash balance data on Friday.

Analysts noted that technically, 9,200 and 9,350 levels in the BIST 100 index are resistance, while 9,000 and 8,900 points are support.

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