Eyes turned to the Fed in global markets

While increasing interest rates around the world negatively affected banks in the USA and Europe, the news flow about banks throughout the week caused sharp movements in the stock markets.

The process that started with the bankruptcy of Silicon Valley Bank (SVB) and Signature Bank in the USA intensified with the announcement that the Saudi National Bank, the largest partner of Switzerland-based Credit Suisse bank in Europe, would not increase their capital.

With the news flow in question, while the share price of Credit Suisse decreased by up to 30 percent, the Swiss National Bank announced an aid package of 54 billion dollars to prevent the crisis.

On the other hand, the US Department of the Treasury, the US Federal Reserve (Fed) and the US Federal Deposit Insurance Corporation (FDIC) announced that First Republic Bank, one of the banks mentioned in the banking crisis, received deposits of 30 billion dollars from 11 large banks.

Although the aforementioned developments seemed to calm the risk perception in the markets for a while, the selling pressure in the stock markets gained strength on the last trading day of the week due to the concerns that the crisis might not be over yet.

Uncertainties regarding monetary policies increased significantly last week, while serious volatility emerged in the expectations in the money markets.

In pricing of the Fed’s monetary policy decisions to be taken next week, it is estimated that there will be a 25 basis point increase in interest rates with a 62 percent probability, while it is predicted that the bank will not increase interest rates with a 38 percent probability.

Analysts noted that the statements of Fed Chairman Jerome Powell are also very important, as well as the bank’s monetary policy steps, and said that the clues about the monetary policy in the next period will have an impact on the direction of the markets.

While the bond markets followed a buying-heavy course with the aforementioned risks, the US 10-year bond yield decreased by 55 basis points to 4.40 percent.

While commodity prices followed a mixed course with the aforementioned news flow, Brent oil’s barrel lost 12 percent last week, recording the steepest decline since April 2020, closing the week at $72.5.

The ounce price of gold, which found support from investors seeking a safe harbor with its increasing risk perception, rose to $1,988 with a weekly gain of 6.5 percent.

FED WEEK IS FACED WITH UNCERTAINTY IN THE USA

While the US stock markets followed a mixed course last week, the Fed’s decisions on Wednesday and Powell’s statements after the meeting placed the focus of investors around the world.

Although the Consumer Price Index (CPI) and Producer Price Index (PPI) data announced in the country last week supported the risk appetite by pointing out that the downward trend in inflation continues, the signals that the inflation pressure may remain sticky for a while in the data announced later in the week increased the concerns.

Accordingly, the US CPI increased by 0.4 percent monthly and 6 percent annually in February, in line with market expectations. On the other hand, the PPI in the country decreased by 0.1 percent on a monthly basis in February, while it increased by 4.6 percent on an annual basis, below the expectations.

Housing starts in the US rose 9.8 percent to 1 million 450 thousand in February, exceeding expectations, while the number of first-time unemployment claims applicants fell to 192 thousand in the week ending March 11.

With these developments, in the New York stock market last week, the S&P 500 gained 1.43 percent and the Nasdaq index gained 4.41 percent, while the Dow Jones index decreased by 0.15 percent.

In the data calendar of the week that started with March 20, second-hand home sales on Tuesday, Chicago national activity index and new home sales on Thursday, durable goods orders and manufacturing industry and services sector Purchasing Managers Index (PMI) data on Friday will be followed.

IN EUROPE, ECB IS NOT FEARED OF MARKETS

While a sales-heavy trend was prominent in the European stock markets last week, the European Central Bank (ECB) increased the three main policy rates by 50 basis points, despite the turmoil in the markets. In Europe, ECB President Christine Lagarde’s statements on Tuesday and Wednesday focused on investors.

In the statement made by the bank, it was noted that inflation is expected to remain at very high levels for a very long time, and it was reported that decisions will be made based on data due to uncertainties in the markets.

Lagarde, who made statements after the meeting, answered the questions regarding the banking crisis by saying that they have important tools in their hands to maintain financial stability and that they will not hesitate to use them if necessary.

Stating that price stability and financial stability can be managed with different tools, Lagarde stated that the bank will closely monitor the macroeconomic data flow due to uncertainties regarding monetary policy.

Analysts stated that the concerns regarding the banking sector in Europe remain strong and that the news flow regarding the sale of Credit Suisse is being closely followed.

Last week, the FTSE 100 index in the UK decreased by 1.01%, the DAX index in Germany by 1.33 percent, the CAC 40 index in France by 1.43 percent and the MIB 30 index in Italy by 1.64 percent.

Next week, on Monday, German PPI and foreign trade balance in the Eurozone, ZEW expectations index in Germany on Tuesday, consumer confidence index in the Eurozone on Thursday, and manufacturing industry and service sector PMI data across the region on Friday will be followed.

ASIA HAS POSITIVE DIVERSE THIS WEEK

While a buying-heavy trend stood out in the Asian stock markets last week, the pricing that the global interest rates would rise less than expected supported the asset prices in the region.

Although the People’s Bank of China (PBoC) did not change the 1-year loan interest rates during the week, it provided liquidity to the market above expectations. While Chinese President Xi Jinping stated that they would support the controlled growth of his country, the announcement that PBoC Chairman Yi Gang would continue to serve was interpreted as the continuation of the current policies.

On the other hand, retail sales in China have increased by 3.5 percent since the beginning of the year, in line with expectations, while industrial production increased by 2.4 percent, slightly below the projections. The acceleration in housing sales in the country caused the concerns about the housing sector to decrease.

US President Joe Biden announced that he plans to meet with Chinese President Xi Jinping.

Analysts said that the visit in question was welcomed in the markets, given the recent tension between the two countries.

While core machinery orders in Japan exceeded expectations with an annual increase of 9.5 percent, industrial production declined by 3.1 percent year on year.

Last week, Japan’s 10-year bond yield decreased by about 20 basis points to 0.30 percent in parallel with the movement in bond yields around the world.

With these developments, the Nikkei 225 index increased by 1.20 percent in Japan, Shanghai composite index increased by 0.73 percent in China, Hang Seng index increased by 1.64 percent in Hong Kong and Kospi index increased by 0.75 percent in South Korea on a weekly basis. .

In the data calendar of the week starting from March 20, the CPI data in Japan will be followed on Friday. Markets in Japan will be closed on Monday for a holiday.

DOMESTIC EYES LOOK AT THE CBRT

While the BIST 100 index closed at 5,136.44 points with a decrease of 4.61 percent last week, eyes were turned to the monetary policy decisions of the Central Bank of the Republic of Turkey (CBRT) on Thursday.

According to the domestic data released last week, Turkey’s current account deficit amounted to 9 billion 849 million dollars in January, while a surplus of 2 billion 602 million dollars was formed in the current account, excluding gold and energy.

Dollar/TL, on the other hand, closed the week at 19.0186, 0.3 percent above the previous weekly closing.

International credit rating agency Fitch Ratings affirmed Turkey’s credit rating as “B” and its outlook as “negative”.

Analysts said that technically 5.100 and 5,000 levels in the BIST 100 index could stand out as support, while 5.200 and 5.340 points could stand out as resistance.

Consumer confidence index data will also be followed on Thursday next week.