Intense data agenda in global markets: Investors’ eyes are on the interest rate decision

Continuing globally for more than a year “hawk” While monetary policies help reduce inflation concerns day by day, it is closely monitored whether signals of slowdown in economies will turn into the possibility of recession.

While the data announced in the USA last week pointed out that the softening in the labor market continued, the fact that the country’s inflation was below expectations stood out as the main factors that increased the risk appetite in the equity markets.

While the Consumer Price Index (CPI) in the USA remained unchanged on a monthly basis in October, it increased by 3.2 percent on an annual basis. The expectation was that it would increase by 0.1 percent monthly and 3.3 percent annually. Annual inflation in the country was at 3.7 percent last month.

Analysts stated that it is certain that the Fed will keep the interest rate constant at the December meeting, based on the pricing in the money markets, and that it is estimated that the bank will start reducing interest rates in June with an 85 percent probability.

Analysts stated that the verbal guidance of Fed officials that it was too early to declare victory in the fight against inflation had relatively dampened the risk appetite in the markets, and that the officials also stated that they did not expect a recession.

Fed Board Member Lisa Cook pointed out that tightening financial conditions may put pressure on some sectors and said that she believes a soft landing in the economy is possible, but it is not guaranteed.

Cleveland Fed President Loretta Mester stated that the issue regarding monetary policy is not about reducing the interest rate, but about how long a restrictive stance will remain, and emphasized that she does not predict a recession for the US economy.

“GROWTH CHALLENGES WILL CONTINUE IN 2024”

On the other hand, last week, international credit rating agency Fitch Ratings reported that the financing and growth difficulties of regional banks in the USA will continue in 2024.

Moody’s, another international credit rating agency, also confirmed the USA’s credit rating of “Aaa” and revised the rating outlook from stable to “negative”.

Last week, the Institute of International Finance (IIF) published its “Global Debt Monitor” report. According to the report, the global debt amount was calculated as 307.4 trillion dollars in the third quarter of this year.

Following these developments, the dollar index, which completed the week at 103.8 with a decrease of 1.9 percent, experienced its strongest weekly decline since July, as the global demand for the dollar decreased.

ONS CLOSED THE WEEK WITH AN RISE

While the ounce price of gold increased by 2.2 percent on a weekly basis and closed the week at $1,981, the US 10-year bond interest rate decreased by 17 basis points to 4.44 percent.

The barrel price of Brent oil, which fell to its lowest level in the last 4 months by testing $ 76.7, completed the week at $ 80.5 with a decrease of 1.2 percent, and continued its downward trend for the fourth week in a row. Analysts reported that along with concerns about demand, remaining strong supply and increasing reserves were effective in the pricing in question.

NEW YORK STOCK EXCHANGES ARE AT THE HIGHEST LEVEL IN THE LAST 3 MONTHS

In a week where intense company balance sheets and macroeconomic data were followed in the USA, New York stock markets followed a positive course, carrying the upward trend for the third week in a row. Thus, New York stock markets reached their highest level in the last three months. The intense data agenda for the next week has become the focus of investors.

Analysts stated that sector- and stock-based volatilities increased due to the balance sheet period, and that the expectation that the Fed may have reached the end of its “hawkish” steps after the inflation announced in the country remained below the expectations, supported the risk appetite in the share markets.

According to the data announced last week in the country, core CPI, which does not include variable energy and food prices, increased by 0.2 percent monthly in October. During this period, core inflation, which was 4 percent annually, recorded its lowest level in 2 years.

While the Producer Price Index (PPI) recorded its biggest monthly decline since April 2020 with 0.5 percent in October, it was below expectations with an annual increase of 1.3 percent.

While the average interest rate for a 30-year mortgage loan in the country remained at its lowest level since the end of September at 7.61 percent, mortgage applications increased by 2.8 percent.

The manufacturing index announced by the US Federal Reserve New York Branch rose to 9.1 in November, exceeding market expectations.

UNEMPLOYMENT APPLICATIONS ARE AT THE PEAK

While the number of people applying for unemployment benefits for the first time in the country was above market expectations, reaching the highest level in 3 months with 231 thousand last week, the number of ongoing applications for unemployment benefits reached a two-year peak with 1 million 865 thousand.

In addition, the US federal government’s budget deficit reached 66.6 billion dollars in October, the first month of the 2024 fiscal year, with a 24 percent decrease compared to the same period last year.

Yesterday, according to a written statement from the White House, US President Joe Biden signed the temporary budget bill, which was previously passed by the House of Representatives and the Senate, to prevent the closure of the federal government.

With these developments, last week, the Nasdaq index in the New York Stock Exchange completed the week with an increase of 2.37 percent, the S&P 500 index with an increase of 2.24 percent and the Dow Jones index with an increase of 1.94 percent.

In the data calendar of the week starting with November 20, CB leading indicators index on Monday, Chicago national activity index on Tuesday, second-hand housing sales, Fed meeting minutes, durable goods orders on Wednesday, consumer confidence index, weekly unemployment benefits applications, manufacturing industry on Friday. and service sector Purchasing Managers Index (PMI) data will be followed.

On Thursday, markets in the USA will be closed for a holiday.

A POSITIVE COURSE WAS DOMINATED IN EUROPEAN EXCHANGES.

Although the data announced last week gave mixed signals in Europe, which is the first region that comes to mind when the inflation and recession dilemma is mentioned, the regional share markets followed a positive course due to the positive course in the USA.

Speaking at the meeting of the European Systemic Risk Board (ESRB) held in Frankfurt last week, European Central Bank (ECB) President Christine Lagarde stated that Europe has so far been protected from the worst-case scenario, which includes all systemic risks occurring simultaneously.

Following the USA, October CPI in England remained below expectations with an annual increase of 4.6 percent, and this strengthened the expectations that the Bank of England (BoE) interest rate increase cycle has come to an end.

The fact that industrial production in the Eurozone fell below expectations, decreasing by 1.1 percent in September compared to the previous month, caused recession concerns throughout the region to come to the fore again.

While the outlook for economic growth weakened as the effects of high interest rates began to be felt, the European Union Commission, in its report, reduced this year’s economic growth expectation in the Eurozone to 0.6 percent due to high inflation, tightening of monetary policy and contraction in demand.

According to the data announced on the last trading day of the week, CPI in the Eurozone was announced with a monthly increase of 0.1 percent and an annual increase of 2.9 percent in October, in line with expectations.

In addition, after the US inflation slowed down more than expected, the euro/dollar parity increased by 2.1 percent on a weekly basis and completed the week at 1.0910, showing the strongest performance in the last 3 months.

On the other hand, the German government announced that it will provide a guarantee of 7.5 billion euros to the company to protect Siemens Energy’s order book.

With these developments, last week the DAX index in Germany gained 4.49 percent, the CAC 40 index in France gained 2.68 percent, the MIB 30 index in Italy gained 3.49 percent and the FTSE 100 index in the UK gained 1.95 percent. .

Next week, PPI in Germany on Monday, Consumer Confidence Index in the Euro Zone on Wednesday, manufacturing industry and service sector PMI across the region on Thursday, growth data in Germany as well as Lagarde’s speech will be followed on Friday.

POSITIVE COURSE CARRIED TO ASIA TOO

After US inflation slowed down more than expected, the increasing risk appetite in global equity markets also carried over to Asian equity markets.

While last week’s face-to-face meeting between US President Joe Biden and Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation summit after nearly a year was the focus of investors, the increase in volatility in the regional share markets after the meeting drew attention.

At the press conference after the meeting, Biden asked a reporter, “After today, do you still see Xi as a dictator, as you said earlier this year?” In response to the question, “Yes, he is. Look, he is a dictator in the sense that he is the man who runs a communist country, based on a completely different administration than ours.” he said.

China reacted to the term “dictator”. “What should be noted here is that there will always be malicious people who try to undermine China-US relations, but they will not succeed,” Foreign Ministry Spokesperson Mao Ning said at the daily press conference held in Beijing. said.

While it is seen that the risk appetite in the Asian markets has diminished following this development, the sharp decline in the company’s share price, especially after the Chinese e-commerce giant Alibaba Group Holding announced that it canceled the plan for the complete division of its cloud group due to US chip export restrictions, was also reflected in the share markets of China and Hong Kong. It was another factor that put pressure on him.

The sharpest decline in house prices in China last week since 2015, indicating that the negativities regarding the country’s economy continue, is seen as another reason limiting the rise in Chinese stock markets.

Moreover, last week, the People’s Bank of China (PBoC) kept the one-year lending rate constant at 2.50 percent, but provided approximately $200 billion more liquidity to the banking system, increasing the net supply in the system to the highest level since December 2016.

On the other hand, increased speculation that Warren Buffett may invest more in Japan’s stock markets supported the Nikkei index upwards.

According to data released in the region last week, industrial production in China exceeded expectations with an annual increase of 4.6 percent and retail sales of 7.6 percent in October.

While the Japanese economy shrank by 0.5 percent monthly and 2.1 percent annually, industrial production in the country exceeded expectations with a 0.5 percent increase on a monthly basis. While exports in the country exceeded expectations with an annual increase of 1.6 percent in October, imports decreased by 12.5 percent in the same period.

In light of these developments, on a weekly basis, the Hang Seng index in Hong Kong is 1.46 percent, the Shanghai composite index in China is 0.51 percent, the Kospi index in South Korea is 2.53 percent and the Nikkei 225 index in Japan is 3.12 percent. recorded an increase.

In the week starting November 20, CPI data will be followed in Japan on Friday. There will be no trading in the markets on Thursday due to a holiday in Japan.

EYES ON THE CENTRAL BANK’S INTEREST RATE DECISION

Domestically, the BIST 100 index, which followed a fluctuating course last week, completed the week with an increase of 1.06 percent at 7,853.36 points, while the interest rate decision to be announced by the Central Bank of the Republic of Turkey (CBRT) at the Monetary Policy Committee (PPK) meeting next week became the focus of investors.

Economists participating in AA Finance’s expectations survey estimate that the CBRT will increase the one-week repo auction interest rate (policy rate) by 250 basis points to 37.50 percent.

Last week, after Deutsche Bank announced that Turkish bonds could be among the best-performing emerging bonds in 2024, BNP Paribas also reported that Turkish bonds have become more attractive following the monetary policy regulation made by the Central Bank of the Republic of Turkey (CBRT) in recent months.

Continuing its downward trend, Turkey’s 5-year credit risk premium (CDS) dropped below 350 basis points for the first time in 3 years last week and tested the level of 347.1. Thus, CDS decreased by approximately 31 basis points since the beginning of the week.

Dollar/TL finished the week at 28.6789, 0.4 percent above the previous close.

Analysts stated that in the BIST 100 index, technically, 7,900 and 8,000 levels may stand out as resistance, while 7,800 and 7,700 points may stand out as support.

On the domestic data agenda next week, international investment position on Monday, international PPI, agricultural input price index on Tuesday, consumer confidence index on Wednesday, CBRT’s interest rate decision on Thursday, weekly money and bank statistics, capacity utilization rate on Friday, The real sector confidence index will be followed.