Global markets continue to seek direction with mixed signals from companies’ financial results and uncertainties regarding the Fed’s monetary policy during the ongoing balance sheet season in the US.
Before the Fed’s monetary policy decisions to be taken next week, macroeconomic data and company financial results affect asset prices. While it is considered certain that the Fed will increase the policy rate by 25 basis points on July 26, the uncertainty regarding the steps to be taken by the Bank after this meeting continues.
Analysts said that after the decline in the number of first-time jobless applicants in the USA, question marks increased more, and the unexpected decline in weekly jobless claims in the USA pointed to a stronger employment report.
On the other hand, analysts stated that the lagged effect of monetary policy decisions is among the main question marks among investors.
Analysts emphasized that the signals to be taken from the decision text of the meeting next week and the statements of Fed Chairman Jerome Powell will have an impact on the direction of the markets.
Analysts said the financial results announced so far eased investors’ concerns about the resilience of the US consumer and the health of the financial system after the banking crisis in March.
Before the Fed meeting, the US 10-year bond yield ended the week at 3.8460 with an increase of 0.4 percent and the dollar index at 101.1 with a gain of 1.1 percent.
In the commodity market, an ounce of gold increased by 0.3 percent to $1,962, a barrel of Brent oil to $80.8 gain, a pound of copper to $3.79 with a decrease of 2.8 percent, and wheat traded at the Chicago Mercantile Exchange increased by 5.3 percent to $6,9650.
Increasing supply concerns after Russia’s withdrawal from the Grain Corridor Agreement caused an increase in wheat prices.
Eyes turned to growth data in the USA
Equity markets in the US finished the week with mixed results with the macroeconomic data announced and the mixed results from the financial results of the companies.
In her statements, US Treasury Secretary Janet Yellen stated that the growth in the USA has slowed down, but the labor market continues to be quite strong, noting that she does not expect a recession.
Yellen stated that the tariffs applied to China are not “for-tax” and pointed to the importance of export controls in ensuring the national security of the USA.
On the other hand, according to the data announced in the country, the New York Fed manufacturing index exceeded expectations with 1.1 in July. Thus, the index outperformed the forecasts for 2 consecutive months.
Fed New York Branch shared the findings of the Access to Credit Survey conducted every four months as part of the Consumer Expectations Survey. Accordingly, the application rate for all types of loans decreased from 40.9 percent to 40.3 percent, recording the lowest level since October 2020.
The number of people applying for unemployment benefits for the first time in the USA fell to 228 thousand in the week ending July 15, falling to the lowest level in two months. In the country, second-hand house sales decreased by 3.3 percent month on month in June, falling to a 5-month low.
In the US, Philadelphia Fed Manufacturing Index came in at minus 13.5 in July, below expectations, showing that the contraction in the sector continues.
In the country, retail sales increased by 0.2 percent on a monthly basis, below the expectations, while industrial production fell by 0.5 percent in the same period, failing to meet the expectations.
Analysts noted that in addition to the Fed’s interest rate decision, macroeconomic data to be announced in the country next week is at the focal point of the markets.
With these developments, the S&P 500 index rose by 1 percent and the Dow Jones index increased by 2.3 percent, while the Nasdaq index decreased by 0.2 percent in the New York stock market last week.
In the week starting with July 24, the service sector and manufacturing industry Purchasing Managers Index (PMI) will be followed on Monday, the housing price index on Tuesday, the Conference Board consumer confidence index, new home sales and the Fed’s interest rate decision on Wednesday, growth, durable goods orders, pending home sales on Thursday, personal income and spending on Friday, and the University of Michigan consumer confidence index.
All eyes will be on the ECB decision in Europe
While a positive trend stands out in the European stock markets, the focus of the markets is the interest rate decision to be announced by the ECB next week.
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.
Developments regarding the Grain Corridor Agreement continue to be at the center of the agenda in Europe.
Inflation pressure in Europe remains stronger than in the USA.
In his statements, ECB Member Joachim Nagel stated that an interest rate hike is necessary at this month’s meeting, and that the September meeting will be acted upon according to the data.
The International Monetary Fund (IMF) announced that it expects a contraction in the German economy this year due to the tightening financial conditions and the energy shock.
While the Consumer Price Index (CPI) in the UK was below the expectations with an annual increase of 7.9 percent in June, it increased by 5.5 percent in the Eurozone, in line with the projections.
Analysts said that the increase in the core CPI, rather than the fact that the inflation in the Euro Zone is in line with the forecasts, indicates that the inflationary environment will have an impact on the region for a long time.
Core CPI in the Eurozone exceeded expectations with an annual increase of 5.5 percent in June.
In Germany, the Producer Price Index (PPI) decreased by 0.3 percent month on month and increased by 0.1 percent year on year. Consumer confidence index in the Eurozone, on the other hand, was minus 15.1.
Last week, the FTSE 100 index in England gained 3.1 percent, the CAC 40 index in France by 0.8 percent, the DAX index in Germany by 0.5 percent and the MIB 30 index in Italy by 0.6 percent.
Next week, the manufacturing industry and services sector PMI in Germany, the Eurozone and the UK on Monday, the ECB interest rate decision and the German GfK consumer confidence on Thursday, the economic confidence index in the Eurozone on Friday and the inflation in Germany will be followed.
Asian markets end the week negative before BOJ decision
Asian markets also followed a sales-weighted course before the BOJ decision.
Last month, annual inflation in Japan was 3.3 percent, above expectations.
Analysts said that inflation is above the BOJ’s 2 percent target, adding that the Bank is not expected to make any changes in its monetary policy, but that speculation that it may make policy adjustments at its meeting next week may increase.
Despite the Chinese government’s steps to support different areas of the economy, the country’s economy grew by 6.3 percent on an annual basis in the second quarter, which brought recession concerns to the agenda again.
Analysts stated that the data announced in the country continues to give mixed signals and stated that industrial production in China exceeded expectations with an annual increase of 4.4 percent in June.
Despite the Chinese government’s steps to support different areas of the economy, the effects of the country’s economy growing below expectations continued, while the People’s Bank of China (PBoC) did not change the medium-term lending interest rates and kept the rates unchanged at 2.65 percent yesterday. The PBoC also kept the lowest loan interest rate at 3.55 percent.
On the other hand, it was stated that a memorandum of understanding was signed between the United Arab Emirates (UAE) and Japan for the establishment of a business council, while 26 agreements and protocols were signed between Saudi Arabia and Japan on renewable energy, technology and agriculture.
Analysts stated that the thought that the Chinese government’s steps to support the economy are not sufficient in the markets, said that more support statements may come from China in the future.
With these developments, the Nikkei 225 index in Japan decreased by 0.3 percent, the Shanghai composite index in China decreased by 2.2 percent, the Hang Seng index in Hong Kong by 1.7 percent and the Kospi index in South Korea by 0.7 percent on a weekly basis.
Domestic markets focused on Inflation Report
In the domestic market, the BIST 100 index in Borsa Istanbul completed the week at 6,687.78 points with an increase of 3,88 percent, while achieving the highest daily and weekly closing of all time, it brought the highest level record to 6,724.42 points.
Mehmet Şimşek, Minister of Treasury and Finance, held intense conversations at the G20 meetings held in India. It was reported that US Treasury Secretary Janet Yellen discussed Turkey’s economic outlook and policy direction with Minister Şimşek and President of the Central Bank of the Republic of Turkey (CBRT) Hafize Gaye Erkan.
During the meeting, it was also noted that how Turkey and the USA, including the G20, can work together to address global economic problems and increase prosperity in the economies of the two countries.
On the other hand, Saudi Arabian Minister of Investment, Khalid bin Abdulaziz al-Falih, stated that they attach great importance to the presence of the private sector in Vision 2030 investments, “We attach great importance to the existence of the private sector in both Saudi Arabia and Turkey. We want investments to diversify and diversify.” said.
In the statement made by the Presidency of Communications, it was reported that 13 documents were signed and accepted between Turkey and the UAE within the scope of President Recep Tayyip Erdoğan’s visit, and the amount of the agreements was 50.7 billion dollars.
The CBRT Monetary Policy Committee (MPC) increased the one-week repo auction rate, which is the policy rate, by 250 basis points to 17.50 percent. In its announcement, the CBRT said, “Front foreign direct investments, significant improvement in external financing conditions, the ongoing increase in reserves and the balancing in the current account account with the support of tourism revenues will contribute strongly to price stability.” it was said.
The CBRT also increased the daily limit of banks for rediscount credits of exporters by 5 times, while requiring 15 percent required reserves to be set for exchange-protected accounts.
Next week, the real sector confidence index and capacity utilization rate will be announced on Tuesday, the 3rd Inflation Report of the year to be announced by the CBRT on Wednesday and the summary of the CBRT Monetary Policy Committee meeting, and the economic confidence index and foreign trade balance will be announced on Friday.
At the 2nd Inflation Report meeting of the year, the CBRT kept its inflation forecast for the end of 2023 at 22.3 percent and its forecast for the end of next year at 8.8 percent.
Dollar/TL, on the other hand, closed the week at 26.9747, 3 percent above the previous week’s closing.
Analysts noted that technically, the 6,700 and 6,850 levels in the BIST 100 index are resistance and 6,500 points are support.