Markets eyes on US inflation – Sözcü
Global markets, which faced historic selling pressure last week after recession concerns rapidly strengthened in the US, showed a mixed trend, although recovery was seen in the following days.
The employment data released in the country continued to fuel recession concerns, causing the risk perception to rise significantly.
Despite the historic selling pressure seen last week, global markets have seen some relief with the “dovish statements” of the US Central Bank (Fed) officials and the decline in the weekly unemployment benefit applications data announced in the country.
The number of people filing for first-time unemployment benefits in the U.S. fell to 233,000 in the week ending Aug. 3, below market expectations. The number of people filing for first-time unemployment benefits in the country fell by 17,000 last week compared to the previous week.
Analysts said the decline in jobless claims provided some relief about the state of the labor market after weak U.S. employment data raised concerns of a recession.
STATEMENTS FROM FED OFFICIALS
While the statements of Fed members were also in the focus of investors, Chicago Fed President Austan Goolsbee stated that it did not make sense to maintain a restrictive policy stance if the economy was weakening.
“The employment numbers were weaker than expected, but it doesn't look like a recession yet,” Goolsbee said. He declined to comment on whether the Fed would hold an emergency meeting to cut interest rates, saying that this was a very big table and that everything, such as interest rate increases and decreases, was always on the table. Goolsbee said that if there was a deterioration in the economy, the Fed would fix it.
Richmond Fed President Thomas Barkin said the cooling in the labor market was due to a slowdown in hiring rather than an increase in layoffs, allowing the Fed to determine its next move. Barkin also said he was very optimistic about seeing good inflation indicators in the next few months.
Analysts said that the inflation data to be announced next week in the US is also of great importance in terms of the direction of the markets.
Pricing in money markets suggests that the Fed could cut interest rates three times during the rest of the year.
BONDS, DOLLARS, GOLD, OIL, BITCOIN
The US 10-year bond yield, which saw its lowest level since June 2023 at 3.66 percent due to recession concerns, later tested above the 4 level as these concerns eased and completed the week with an increase of 15 basis points at 3.94.
Last week, the US 2-year Treasury bond yield fell to 3.660%, falling below the 10-year bond yield for the first time since July 2022.
The dollar index fell 0.1 percent to 103.1.
Last week, the ounce price of gold decreased by 0.5 percent to $2,431, while the barrel price of Brent oil increased by 3.1 percent to $79.7.
Analysts said rising bond yields were weighing on gold's ounce price. The possibility of wider conflict in the Middle East, where most of the world's oil reserves are located, has fueled supply concerns in oil markets.
The VIX Index, which shows the fluctuations in the S&P 500 Index in the US and is also known as the “fear index”, fell to 23.50 after reaching a 4-year peak of 65.70.
Bitcoin, which fell to $49,000 last week due to recession concerns, later rose by 36.1 percent to $66,700.
NEW YORK STOCK EXCHANGE WAS MIXED
The New York Stock Exchange ended the week on a mixed note, despite a recovery trend on other days following Monday's selling pressure.
While the decline in technology stocks stood out, the shares of Nvidia, one of the companies that attracted attention in the artificial intelligence rally in the markets, lost 2.35 percent of their value.
Shares of Apple, one of the US technology giants, fell by 1.65 percent last week after Berkshire Hathaway, whose CEO is US billionaire and investor Warren Buffett, halved its stake in the company.
Among other major technology companies, Microsoft's shares fell by 0.60 percent, Alphabet's shares fell by 1.79 percent and Amazon's shares fell by 0.57 percent. US electric carmaker Tesla's shares also fell by 3.69 percent.
Banking stocks also fell on recession fears, with Citigroup's shares falling 1.57 percent, Wells Fargo's shares falling 0.94 percent and Morgan Stanley's shares falling 1.18 percent.
As investors continue to follow the financial results of companies during the ongoing earnings season, Caterpillar's shares rose by 5.42 percent after the company reported an increase in adjusted profit. Uber's shares also rose by 16.19 percent after the company's revenue and profit exceeded expectations in the second quarter.
Disney shares fell 3.75 percent after the company's financial results beat expectations but operating income at its parks unit fell.
With these developments, the Nasdaq index lost 0.18 percent and the Dow Jones index lost 0.60 percent last week, while the S&P 500 index closed just above the previous close.
Next week, the Treasury budget balance will be released on Monday, the Producer Price Index (PPI) on Tuesday, the Consumer Price Index (CPI) on Wednesday, the New York Fed industrial index on Thursday, retail sales, weekly unemployment claims, industrial production, capacity utilization, housing starts and building permits on Friday, and the University of Michigan consumer confidence index.
MIXED TREND IN EUROPEAN STOCK EXCHANGES
European stock markets were mixed last week.
While the statements of the European Central Bank (ECB) officials are being followed in Europe, ECB Member Olli Rehn said that the bank may continue to reduce interest rates if confidence that the inflation trend is slowing strengthens.
According to data released in Europe, seasonally and calendar-adjusted industrial production in Germany increased by 1.4 percent in June compared to the previous month, but fell by 4.1 percent compared to the same period last year.
Market expectations were that industrial production in the country would increase by 1 percent on a monthly basis in June.
The increase in industrial production was mainly due to the recovery in the automotive sector. In June, seasonally and calendar-adjusted exports in the country decreased by 3.4 percent compared to the previous month, reaching 127.7 billion Euros. In June, exports decreased by 4.4 percent compared to the same period last year.
Markets had expected exports to fall by 1.5 percent on a monthly basis. Germany's imports in June rose by 0.3 percent to €107.3 billion compared to the previous month, but decreased by 6.4 percent compared to the same period last year. Thus, Germany had a trade surplus of €20.4 billion in June.
The services sector PMI in Germany, which was 53.1 in June, fell to 52.5 in July. Thus, the services sector PMI in Germany fell to its lowest level in the last 4 months.
Analysts said the data showed that demand for goods and services in the region was weakening. Germany's July CPI also rose by 0.3 percent monthly and 2.3 percent annually, in line with expectations.
The Eurozone investor confidence index, which was minus 7.3 points in July, fell to minus 13.9 in August.
In the region, the Producer Price Index (PPI) increased by 0.5 percent on a monthly basis in June, but decreased by 3.2 percent annually.
Analysts said that mixed signals from macroeconomic data released in Europe continue to cause concerns about economic activity in the region, and that the European Central Bank (ECB) is likely to cut interest rates next month.
With these developments, the FTSE 100 index in the UK lost 0.08 percent, the MIB 30 index in Italy lost 0.73 percent, the DAX index in Germany gained 0.35 percent and the CAC 40 index in France gained 0.25 percent.
In the week of August 12, ZEW indices will be followed on Tuesday, growth in the Eurozone and CPI in the UK on Wednesday, growth and industrial production in the UK on Thursday, and foreign trade balance in the Eurozone on Friday.
ASIAN STOCK MARKETS DECLINE EXCEPT HONG KONG
Asian stock markets, excluding Hong Kong, saw a sell-heavy trend last week.
Asian stock markets have been driven down by expectations that the Bank of Japan (BOJ) may be entering a rate hike cycle, coupled with concerns about a recession in the US.
Analysts pointed out that no stock exchange in the world had reacted as strongly as Tokyo's to the recent turmoil in financial markets, and attributed this rapid loss of value to the appreciation of the yen.
The dollar-yen parity, which rose to 161.3 during the year, tested its lowest level since January at 142.2.
The dollar/yen parity closed the week with a 0.4 percent increase at 146.6.
In the foreign exchange market, signs of a slowdown in the US economy, especially the Bank of Japan's policy rate hike by 15 basis points to 0.25 percent and the bank's announcement of a plan to halve monthly bond purchases over the next few years, led to a significant appreciation of the yen against other currencies, especially the dollar.
Analysts, who calculated that this increase in the yen would reduce corporate profits, reported that this situation would also have a negative impact on the share prices of the country's international industrial companies.
Analysts said Japanese yen borrowing and investments in high-yielding assets triggered selling pressure in regional markets amid the BOJ's interest rate hike and the Japanese yen's rapid appreciation.
Concerns that both the strengthening yen due to the BOJ's hawkish stance and the increasing fear of a recession in the world could negatively affect the performance of Japanese exporting companies played an important role in deepening the selling pressure in Japanese stock markets.
Expectations that Japan may have entered a rate hike cycle have brought the “carry trade” back onto the agenda.
Analysts noted that Japan's long-standing expansionary policy has made carry trade operations attractive in the country.
Although the statements of Bank of Japan (BOJ) Deputy Governor Shinichi Uchida that the BOJ would not increase interest rates if the markets were unstable reassured the markets somewhat, selling pressure dominated the Asian markets.
Uchida stated that due to the extremely volatile developments in financial and capital markets at home and abroad, monetary expansion should be maintained at the current policy rate for the time being.
On the other hand, according to the minutes of the meeting published by the Bank of Japan, some members of the bank suggested a further increase in the policy rate. The minutes stated that assuming the price stability target will be achieved in the second half of fiscal 2025, the bank should raise the policy rate to the neutral interest rate level by that date.
According to macroeconomic data released in the region, the Consumer Price Index (CPI) in China exceeded expectations by increasing by 0.5 percent on an annual basis in July. The country's CPI had increased by 0.2 percent on an annual basis in June.
The Reserve Bank of Australia also left its policy rate unchanged at 4.35 percent.
With these developments, the Nikkei 225 index in Japan, which experienced its sharpest sell-off since 1987 on Monday, lost 2.46 percent, the Kospi index in South Korea lost 3.27 percent, and the Shanghai Composite index in China lost 1.49 percent, while the Hang Seng index in Hong Kong gained 0.85 percent.
Next week, Japanese PPI will be monitored on Tuesday, Japanese growth on Thursday, and Chinese industrial production and retail sales will be monitored.
DOMESTIC MARKETS FOCUSED ON BALANCE OF PAYMENTS DATA
While the BIST 100 index in Borsa Istanbul closed the week with a 5.40 percent decrease at 9,907.38 points, the dollar/TL closed the week at 33.4950, 0.9 percent above the previous close.
On the other hand, the Governor of the Central Bank of the Republic of Turkey (CBRT), Fatih Karahan, stated in a statement he made at the press conference he held to introduce the Third Inflation Report of the year that they did not make any changes to the inflation estimates for the end of 2024, 2025 and 2026, and said, “We predict that inflation will decline to 38 percent by the end of 2024, and we maintained the 2025 and 2026 estimates at 14 percent and 9 percent, respectively.”
Next week, the labor force statistics will be followed on Monday, the balance of payments and housing sales on Tuesday, the budget balance on Thursday, and the housing price index and market participant survey on Friday.
Economists participating in the AA Finance Balance of Payments Expectations Survey estimated that the current account had a surplus of $152.4 million in June. Economists predicted that the current account deficit would be $22 billion 756 million in 2024.