At the beginning of last week, despite the positive news about the increase in the debt limit, the effect was limited and the global markets started to look for direction with the hawkish statements of the Fed members at first.
However, both the debt limit crisis in the USA and the easing of concerns about the Fed later increased the risk appetite in the markets.
While the US Senate has approved the bill that will prevent the country from defaulting by increasing the debt limit, the bill, which foresees the suspension of the limit until January 1, 2025, will be submitted to the signature of US President Joe Biden for enactment.
While the expectations regarding the monetary policy in the country changed significantly compared to the beginning of the week, the verbal guidance of the Fed members was effective in this development.
While it is estimated that the Fed will not change the policy rate with a 72 percent probability at the meeting on June 14, and that it will increase the interest rate by 25 basis points with a 28 percent probability, the eyes in the markets turned to the intense data agenda next week.
Following these developments, the 10-year bond yield in the USA closed the week at 3.6950 with a decrease of 2.9 percent.
Commodity prices also followed a generally positive course. The week ended the week at $1,949.7 an ounce of gold with an increase of 0.2 percent, a pound of copper at $3.72 with an increase of 1.6 percent, and a barrel of Brent oil at $76.4 with a decrease of 1%. In this month’s meeting, the ounce price of gold found support due to the decline in pricing for an interest rate hike.
Analysts said that copper prices found support from the easing of recession concerns.
Uncertainties in demand indicators for the USA and China, on the other hand, suppressed Brent oil prices.
Fed members softened
Equity markets in the USA followed a positive course last week with the news flow on the debt limit and the softening of the Fed members’ statements.
Although there were hawkish statements from Fed officials in the middle of the week, subsequent statements by bank members calmed the concerns.
Richmond Fed President Thomas Barkin said yesterday that he is looking for signs of cooling demand to convince him that inflation is falling, and that inflation will be more stubborn than many had hoped.
Philadelphia Fed President Patrick Harker stated that the Fed should not raise interest rates at its upcoming June meeting. Stating that he thinks that a meeting can be skipped during the rate hike, Harker noted that future data may change his mind.
Fed Board Member Philip Jefferson said that the Fed’s decision to keep the interest rate constant at a meeting should not mean that monetary policy tightening has ended.
st. Louis Fed President James Bullard stated that monetary policy is in better shape after the rate hikes.
Data released in the country continued to give mixed signals. The S&P Case-Shiller National Home Price Index rose 0.4 percent in seasonally adjusted terms in March.
The index of housing prices in 20 cities in the USA increased by 0.5 percent on a monthly basis in seasonally adjusted terms, and recorded its first decline since May 2012 with 1.1 percent on an annual basis.
On the other hand, according to the macroeconomic data announced in the country, while the labor market remains warm, the Number of Jobs Vacancies for JOLTS exceeded the market expectations with 10 million 103 thousand in April.
On the other hand, in the Fed’s “Beige Book” report, it was reported that economic activity in the country changed “very little” in April and early May, while future growth expectations deteriorated slightly.
While private sector employment in the USA increased by 278 thousand people in May, exceeding the market expectations, the annual wage increase decreased from 6.7 percent to 6.5 percent in the said period.
Analysts reminded that the Fed closely monitors wage increases regarding inflation, and said that the decline in this area may have relieved the Bank’s policy area.
While non-farm employment in the USA increased by 339 thousand in May, above the expectations, the unemployment rate rose to 3.7 percent. Average hourly earnings, on the other hand, increased by 0.3 percent monthly and 4.3 percent annually, below market expectations. Average hourly earnings rose 0.5 percent monthly and 4.4 percent annually in April.
Analysts stated that although the non-farm employment data announced in the country exceeded expectations, the expectations that interest rates will not change due to the increase in unemployment rate and the slowdown in the rise in average hourly earnings are still high.
However, international credit rating agency Fitch Ratings stated that despite the overcoming of the debt limit crisis in the USA, the country’s credit rating continues to be negative, considering the results of the recent policy of escalating the tension and the outlook for the medium-term financial and debt trajectory.
With these developments, the S&P 500 gained 1.83 percent, the Nasdaq index by 2.04 percent and the Dow Jones index by 2.02 percent in the New York stock market last week.
In the week starting from June 5, on Monday, factory orders, durable goods orders, services sector Purchasing Managers Index (PMI) and ISM services sector PMI, foreign trade balance on Wednesday, weekly unemployment applications and wholesale stocks on Thursday will be followed.
ECB members’ hawkish tones softened as inflationary pressures eased in Europe.
While a mixed course was observed in the European stock markets last week, the hawk tones of the European Central Bank (ECB) members softened as inflationary pressures decreased.
Annual inflation in Germany, which was 7.2 percent in April, fell to 6.1 percent in May, more than expected.
Annual inflation in the Eurozone, which was 7 percent in April, became 6.1 percent in May.
Similarly, inflation in France fell to 5.1 percent, the lowest level in a year, due to the decline in energy, food and service prices.
Although ECB member Olli Rehn stated that the ECB will not consider a rate cut before the desired slowdown in core inflation occurs, ECB President Christine Lagarde stated that there is no clear evidence that core inflation has peaked and pointed out that interest rate hikes will continue.
Emphasizing that interest rate hikes started a downward trend in inflation and that they should move more slowly in the next rate hikes, Lagarde said, “We will create our new projections at our meeting on June 15, and this will present us the updated picture for our tightening policy.” used the phrases.
ECB member Fabio Panetta told a newspaper yesterday that the final interest rate is not far from current levels.
Last week, the FTSE 100 index in the UK lost 0.26 percent, the CAC 40 index in France lost 0.66 percent, while the DAX index in Germany gained 0.42 percent and the MIB 30 index in Italy gained 1.32 percent.
Next week, ECB President Lagarde’s speech on Monday, service sector PMI across the region, factory orders in Germany on Tuesday, retail sales in the Eurozone, industrial production in Germany on Wednesday, growth in the Eurozone on Thursday will be followed.
Hopes for the Fed in Asia surpassed the worries about the regional economies
On the Asian side, it was seen that the macroeconomic data announced last week triggered the concerns about the economies.
According to the data announced in China, the manufacturing industry PMI decreased to 48.8, indicating that the contraction in the manufacturing industry accelerated, while the service sector PMI fell to 54.5.
While industrial production in Japan fell by 0.3 percent on an annual basis, well below expectations, retail sales, which increased by 5 percent on an annual basis, failed to meet the projections.
The unemployment rate in Japan fell to 2.6 percent. On the other hand, Bank of Japan (BoJ) Governor Ueda Kazuo said that they will continue their expansionary monetary policies as long as necessary.
Kazuo said it will take time for inflation to reach the Bank’s target.
The strengthening of expectations that the Fed might not raise interest rates on June 14 increased the risk appetite in the region.
Recalling that especially the technology-intensive Hong Kong stock market has been negative since mid-April, with uncertainties regarding the Fed’s monetary policy for a while, he said that interest rate-sensitive technology companies received support from the possibility that the Fed may pass at this month’s meeting.
With these developments, the Nikkei 225 index in Japan rose by 1.97 percent, the Shanghai composite index in China rose by 0.55 percent, the Hang Seng index in Hong Kong by 1.08 percent and the Kospi index in South Korea by 1.66 percent on a weekly basis. .
In the data calendar of the week starting with June 5, the Caixin service sector PMI in China on Monday, the foreign trade balance in China on Wednesday, and the inflation data in China on Friday will be followed.
Domestically, eyes turned to inflation and industrial production data.
While the BIST 100 index finished at 5,114.97 points with an increase of 11.66 percent last week, domestic eyes were turned to the inflation data to be announced on Monday and industrial production data to be announced on Friday.
According to the domestic data released last week, the Turkish economy grew by 4 percent in the first quarter of the year. Having grown for 11 consecutive quarters, the Turkish economy thus managed to become the second highest growing country among the Organization for Economic Cooperation and Development (OECD) countries and the third in the G20.
Dollar/TL, on the other hand, closed the week at 20.9610, 4.9 percent above the previous weekly close.
Analysts noted that technically, 5.150 and 5.200 levels in the BIST 100 index are resistance and 5,000 points are support.
Economists expect the Consumer Price Index (CPI) to increase by 0.07 percent in May.
According to the average of economists’ May inflation expectations (0.07 percent), it is calculated that annual inflation, which was 43.68 percent in the previous month, will decrease to 39.62 percent.
Next week, the CPI-based real effective exchange rate on Tuesday and the Treasury cash balance on Wednesday will be followed.