After concerns that economic activity in the US could slow down more sharply than expected led to deepening selling pressure in global markets yesterday, risk appetite in the markets increased today.
While the strengthening of recession concerns in the country led to sharp declines in global stock markets yesterday, the possibility of the US Federal Reserve (Fed) holding an emergency meeting and cutting interest rates to calm the anxiety in the markets came to the fore.
The effects of concerns that the Fed's recent decision to cut interest rates urgently could increase concerns about the course of the economy and therefore create panic in the markets were also felt intensely yesterday.
Analysts pointed out that the decision to cut interest rates urgently could be interpreted as the Fed losing control over the markets, and stated that the bank should clarify the steps it will take in the short term.
The Fed's latest emergency rate cut decision came amid growing concerns about the economic impact of the Covid-19 pandemic.
On the other hand, according to data released yesterday in the US, the Purchasing Managers Index (PMI) for the service sector in the country provided some relief by indicating expansion in the sector in July. The US Institute for Supply Management's (ISM) service sector Purchasing Managers Index (PMI) increased by 2.6 points on a monthly basis in July to 51.4, in line with market expectations.
STATEMENT FROM FED OFFICIALS
While these developments and the statements of Fed officials are being closely followed, Chicago Fed President Austan Goolsbee stated in an interview today that it does not make sense to maintain a restrictive policy stance if the economy is 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.
Analysts stated that markets relaxed somewhat after the data released yesterday in the US and the statements of Fed officials. Analysts said that risk appetite increased in the markets today due to the thought that the correction seen in the markets yesterday, led by Japanese markets, may be excessive, but investors may act cautiously.
With these developments, expectations that the Fed will cut interest rates by 50 basis points in September have also strengthened.
BONDS, GOLD, OIL, CRYPTO
After seeing its lowest level since June 2023 at 3.66 percent, the 10-year bond yield in the US rose to 3.84 percent following the statements of Chicago Fed President Goolsbee and data indicating growth in the service sector.
The US 2-year bond interest, which fell to 3.66, rose to 3.97 percent at the close.
The VIX Index, also known as the “fear index”, which shows the fluctuations in the S&P 500 Index in the US, fell to 38.57 after reaching a 4-year peak of 65.70.
The price of an ounce of gold, which closed yesterday with a 1.3 percent loss at $2,410, is down 0.3 percent today at $2,403. Analysts said that despite the decline in gold, geopolitical risks and the fact that the Fed is certain to cut interest rates could support the price of an ounce of gold.
The barrel price of Brent oil, which fell 0.1 percent to $77.2 yesterday, is now down 0.3 percent to $76.9.
While there was also a recovery in the cryptocurrency markets, Bitcoin increased by 2.1 percent to $55,506.
US STOCK MARKET’S BIGGEST DECLINE IN TWO YEARS
The New York Stock Exchange closed the first trading day of the week with a sharp decline as recession concerns in the US grew rapidly stronger.
While the decline in technology stocks was prominent yesterday, the shares of Nvidia, one of the companies that attracted attention in the artificial intelligence rally in the markets, lost 6.36 percent of their value.
Shares of Apple, one of the US technology giants, fell by 4.82 percent 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 3.27 percent, Meta's shares by 2.54 percent, Alphabet's shares by 4.61 percent and Amazon's shares by 4.10 percent. US electric carmaker Tesla's shares also fell by 4.23 percent.
Banking stocks also fell due to recession fears, with Citigroup's shares falling 3.42 percent, Wells Fargo's shares falling 2.14 percent, JPMorgan Chase's shares falling 2.13 percent and Morgan Stanley's shares falling 3.94 percent.
At the close, the Dow Jones index lost more than 1,000 points, falling 2.60 percent to 38,703.27 points. The S&P 500 index fell 3 percent to 5,186.33 points and the Nasdaq index fell 3.38 percent to 16,208.38 points.
The Dow and S&P 500 indexes posted their biggest daily losses since September 2022.
Index futures contracts in the US started the day with an increase.
RECESSION WORRIES IN EUROPE TOO
There were also sharp sales in Europe yesterday. In Europe, signals from macroeconomic data continue to highlight recession concerns.
The composite Purchasing Managers Index (PMI) in the Eurozone, which was 50.9 in June, fell to 50.2 in July. Thus, the composite PMI in the Eurozone fell to its lowest level in the last 5 months.
The services sector PMI in the Eurozone, which was 52.8 in June, fell to 51.9 in July, the lowest level in the last 4 months.
In Germany, the services sector PMI, 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.
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.
Following these developments, it is almost certain that the European Central Bank (ECB) will cut interest rates next month.
With these developments, the FTSE 100 index in the UK decreased by 2.04 percent, the CAC 40 index in France decreased by 1.42 percent, the DAX 40 index in Germany decreased by 1.82 percent and the MIB 30 index in Italy decreased by 2.27 percent. Index futures contracts in Europe started the day with an increase.
MAKEUP DAY IN JAPAN
In Asian markets, which experienced a historic decline yesterday due to increasing recession concerns, an upward trend came to the fore today, led by Japanese stock markets, and some of the losses were compensated.
Yesterday, the selling pressure in Japan was particularly driven by the risk perception regarding the country's assets reaching an extreme level, following expectations that the Bank of Japan (BOJ) may have entered an interest rate hike cycle, combined with recession concerns in the US.
Analysts said yesterday that 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.
Thus, both the strengthening yen due to the BOJ's hawkish attitude and the concern that the increasing recession fears 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.
The yen, which reached its highest level against the dollar since January 2, 2024 yesterday, fell today. The dollar/yen parity, which fell to 141.69 yesterday, increased by 1.1 percent today and settled above the 145 level.
On the other hand, today, Japan's Ministry of Finance, Financial Services Agency and BOJ officials are expected to meet to discuss the situation in the markets.
The Reserve Bank of Australia also left its policy rate unchanged at 4.35 percent.
The Nikkei 225 index, which experienced its sharpest sell-off since 1987, gained 8.9 percent, the Kospi index in South Korea gained 4 percent, the Hang Seng index in Hong Kong lost 0.1 percent and the Shanghai Composite index in China lost 0.3 percent.
5.5 PERCENT LOSS ON BORSA ISTANBUL
BIST 100 index in Borsa Istanbul, which followed a sales-heavy course in the country yesterday, closed the day at 9,893.41 points, losing 5.54 percent of its value compared to the previous close.
On the other hand, yesterday, as losses in the BIST 100 index exceeded 5 and 7 percent, the index-related circuit breaker was activated twice.
Dollar/TL, closing yesterday with a 0.4 percent increase at 33.3502, is being traded at 33.3172 with a 0.1 percent decrease at the opening of the interbank market today.
On the other hand, yesterday the Consumer Price Index (CPI) increased by 3.23 percent on a monthly basis in July, and the Domestic Producer Price Index (D-PPI) increased by 1.94 percent. Annual inflation was 61.78 percent in consumer prices and 41.37 percent in domestic producer prices.
Analysts stated that the real effective exchange rate based on CPI will be monitored domestically today, factory orders in Germany, foreign trade balance in the US, and retail sales in the Eurozone abroad, and noted that technically, 10,450 and 10,400 points are support and 10,700 points are resistance in the BIST 100 index.
Here are the data to follow in the markets today:
09.00 Germany, June factory orders
12.00 Eurozone, June retail sales
14.30 Türkiye, July real effective exchange rate
15.30 US, June Foreign Trade Balance