While the concerns about the economic activity around the world are getting stronger day by day, the mixed signals from the data announced in the USA continue to make pricing difficult.
Despite the fact that the inflation concerns in the USA decreased partially last week, the recession concerns also had an impact on the pricing.
In this context, central banks are expected to continue their “hawk” steps in the fight against inflation.
The signals taken from the meeting minutes of the US Federal Reserve (Fed) also made pricing difficult.
The aforementioned minutes revealed that some Fed officials stated that they were in favor of increasing the interest rate by 25 basis points at the June meeting or that they would support such a proposal.
In the minutes, it was stated that all Fed officials were of the opinion that it would be appropriate to maintain the tight stance in monetary policy.
While following the statements of Fed officials, New York Fed President John Williams stated that he supports the bank’s decision to keep the interest rate constant in June.
Saying that the Fed still has things to do in balancing supply and demand, Williams said that he thinks there is more work to be done regarding the interest rate.
With these developments, the prediction in the money markets that the Fed will increase interest rates by 25 basis points with a 92 percent probability at the meeting on July 26 remains strong.
With these developments, the 10-year bond yield in the USA tested the highest level since November 2022 with 4.0940.
In the commodity market, a generally positive trend was observed. The week ended the week at $1,926 an ounce of gold with an increase of 0.3 percent, a pound of copper at $3.76 with an increase of 0.3 percent, and a barrel price of Brent oil at $78.2 with an increase of 3.9 percent.
While Saudi Arabia announced that it will extend the supply cut of 1 million barrels until August, Russia announced that it will reduce its daily oil supply by 500,000 barrels and Algeria by 200,000 barrels.
Analysts stated that the demand for the dollar decreased and the demand for products traded in the commodity market increased due to the fact that the non-farm employment data announced in the USA did not meet the expectations.
Eyes focused on inflation data in the USA
Equity markets in the USA followed a sales-heavy course, with the expectations that the Fed will continue its hawkish policies and mixed signals from the data announced in the country.
In the country, the Supply Management Institute (ISM) manufacturing index came in at 46 in June, below market expectations, while the contraction in the manufacturing industry continued.
The Manufacturing Sector Purchasing Managers Index (PMI) for June, announced by S&P Global, was 46.3 in line with expectations.
Construction spending in the US increased by 0.9 percent in May, above market expectations. Factory orders in the US rose 0.3 percent in May, rising below market expectations.
While the number of people who applied for unemployment benefits for the first time in the country was 248 thousand in the week ending July 1, slightly above the market expectations, the Number of Jobs Opened in JOLTS remained below the market expectations with 9 million 824 thousand in May.
The Procurement Management Institute (ISM) service sector Purchasing Managers Index (PMI) in the country, on the other hand, increased by 3.6 points on a monthly basis to 53.9 in June, exceeding the projections.
The foreign trade deficit in the USA, on the other hand, decreased by 7.3 percent on a monthly basis in May and fell to 69 billion dollars. In the country, private sector employment increased by 497 thousand people in June, exceeding market expectations, recording the largest increase since February 2022, while non-farm employment increased by 209 thousand people in June, below expectations. The unemployment rate fell from 3.7 percent to 3.6 percent.
Analysts noted that although the non-farm employment data came in below expectations, the labor market is still strong.
Stating that the eyes in the USA are focused on the inflation data to be announced next week, analysts said that inflation may have an impact on the direction of the markets and on the rhetoric of the Fed officials.
With these developments, in the New York stock market, the S&P 500 depreciated by 0.4 percent and the Dow Jones index depreciated by 1.1 percent, while the Nasdaq index remained flat.
In the week starting July 10, wholesale stocks on Monday, Consumer Price Index (CPI) and Fed’s Beige Book report on Wednesday, Producer Price Index (PPI) on Thursday, weekly unemployment claims, treasury budget balance, University of Michigan consumer confidence index on Friday will be done.
Inflation and recession concerns continue to suppress asset prices in Europe.
While the European stock markets followed a negative course last week, inflation and recession concerns continue to suppress asset prices.
The ongoing events in France continue to suppress the risk appetite. On the other hand, European Central Bank (ECB) officials emphasized that they will continue to increase interest rates as part of the fight against inflation.
ECB President Christine Lagarde stated that the bank still has a long way to reduce inflation, but they have provided a significant pullback in inflation.
ECB member Joachim Nagel said there is still a long way to go in interest rate hikes.
On the other hand, while the difference between the 2-year bond rate and the 10-year bond rate in Germany is up to 80 basis points, it is stated that if the ECB continues its hawkish steps, the said gap may widen further.
While this situation strengthens the concern that Germany may enter a recession, it is also feared that it may have a very negative impact on the Eurozone as it is the strongest economy in the region.
While it is considered certain that the ECB will increase interest rates by 25 basis points at this month’s meeting, the bank is expected to increase interest rates by 50 basis points in total until the end of the year.
Consumers’ Eurozone inflation expectations for next year fell to the lowest level since March 2022 in May, according to the ECB Survey of Consumer Expectations. Retail sales in the Eurozone remained stable in May compared to the previous month. The PPI in the Eurozone, on the other hand, decreased by 1.9 percent on a monthly basis in May. Factory orders in Germany rose 6.4 percent in May, the highest monthly increase since June 2020, driven by car, ship and train orders.
The Bank of England (BoE) is reportedly considering plans to force more international banks to set up subsidiaries in the country. BoE Chairman Andrew Bailey stated that the most important priority of the bank is to reduce high inflation.
Bailey noted that some retailers in the country apply high prices when necessary.
“If you look at gas prices, some vendors are probably charging too much for it (for the sale).” In his speech, Bailey pointed out that the role of inspection institutions is extremely important in preventing retailers from applying excessively high prices.
Last week, the FTSE 100 index lost 3.7 percent in the UK, the CAC 40 index in France by 3.9 percent, the DAX index in Germany by 3.4 percent and the MIB 30 index in Italy by 1.7 percent.
Next week, the CPI in Germany will be followed on Tuesday, and industrial production will be followed in the UK and the Euro Area on Thursday.
Concerns that relations between China and the United States could deteriorate again are weighing on asset prices.
Concerns that relations between China and the United States could deteriorate again are weighing on asset prices. While tensions have been high between the two countries for a while due to the production of semiconductor chips, China announced that it has limited the export of gallium and germanium materials used in semiconductor chip production as of August 1, on the grounds of “protecting national security and interests” with its decision today.
Analysts emphasized that the move in question triggered concerns that it could further increase tensions in the region.
The news flow in the USA that Chinese companies are preparing to restrict the access of American giant companies such as Microsoft and Amazon to cloud computing services also occupied Asian markets.
Visiting China for the first time, US Treasury Secretary Janet Yellen said she was “concerned” about China’s restrictions on exports of certain metals used to make chips and electronics.
In her meeting with Chinese Premier Li Chiang, Yellen stated that the United States seeks healthy competition with China based on fair rules, which benefits both countries rather than a “winner-take-all” approach.
Analysts stated that the tension between the two countries, which has recently resurfaced over export permits, has negatively affected the risk appetite, adding that the decisions that will come out of the meeting are expected to have an impact on asset prices.
On the other hand, the Reserve Bank of Australia (RBA), while keeping the policy rate unchanged at 4.10 percent, directed that it may continue to increase interest rates in the upcoming meetings.
In China, manufacturing industry Purchasing Managers Index (PMI) decreased to 50.5 but continued to expand, while manufacturing industry PMI in Japan was 49.8.
Also in China, the Service Industry Purchasing Managers Index (PMI) fell from 57.1 to 53.9, and in Japan from 54.2 to 54.
Analysts stated that the risk appetite in the region decreased significantly due to the contraction in the manufacturing industry in China, as well as the decline in the service sector.
With these developments, the Nikkei 225 index in Japan decreased by 2.4 percent, the Shanghai composite index in China decreased by 0.2 percent, the Hang Seng index in Hong Kong decreased by 2.9 percent and the Kospi index in South Korea decreased by 1.5 percent on a weekly basis. .
In the data calendar of the week starting with July 10, foreign trade balance in Japan on Monday, CPI and PPI in China, PPI in Japan on Wednesday, foreign trade balance in China on Thursday, industrial production and capacity utilization rate in Japan on Friday will be followed.
Domestically, eyes turned to industrial production and balance of payments data.
In the domestic market, the BIST 100 index in Borsa Istanbul completed the week with an increase of 7.43 percent at 6,187.09 points, achieving the highest daily and weekly closing of all time, and brought its highest level record to 6,223.26 points.
According to the domestic data announced last week, the Consumer Price Index (CPI) increased by 3.92 percent and the Domestic Producer Price Index (D-PPI) increased by 6.5 percent on a monthly basis in June. Annual inflation fell to the lowest level of the last 18 months with 38.21 percent in consumer prices and 40.42 percent in domestic producer prices in the last 25 months.
Dollar/TL, on the other hand, closed the week at 26.0610, 1.1 percent above the previous weekly close.
Analysts stated that 6,000 and 5,900 levels in the BIST 100 index are in the support position and 6,250 points are in the resistance position, and stated that domestic eyes are turned to industrial production and balance of payments data.
Economists participating in the AA Finans Industrial Production Expectation Survey expect the calendar adjusted industrial production index to increase by 1.44 percent in May compared to the same period of the previous year.
Economists, who predict that the unadjusted industrial production index will increase by 5.95 percent on an annual basis in May, expect the current account to have a deficit of 7.03 billion dollars in May.