While expectations that central banks will begin cutting interest rates in March continue to lose momentum, hopes that economies can manage this period without slipping into recession are supporting risk appetite.
Predictions that economic activity will not slow as much as feared are affecting the direction of markets.
On the other hand, while it is certain that the Fed will hold interest rates steady at its meeting this month, the probability that the bank will begin cutting rates in March is 46 percent, according to pricing in money markets.
While expectations that restrictive anti-inflation measures will be replaced by dovish measures from March are fading, the question remains as to when central banks around the world will start cutting interest rates.
According to analysts, although this situation increased uncertainty in the markets, the upward trend in the stock markets continued as signs of continued strong economic activity in the US had a positive impact on companies’ financial results.
Although inflation has slowed in the US, positive signals from economic activity increase the chances of a “soft landing” for the economy.
On the other hand, the primaries before this year’s election in the USA are continuing. Former US President Donald Trump is ahead in the Republican Party primaries in New Hampshire. Analysts reported that this victory gave Trump a significant advantage to become the Republican Party’s presidential nominee.
The dollar index, continuing its upward trend for the fourth week in a row, ended the week up 0.2 percent at 103.4. The US 10-year bond interest rate closed the week at 4.1460 percent, just above the previous week.
Concerns that the central banks’ dovish steps could be delayed are weighing on the gold ounce price. The gold price per ounce fell 0.5 percent to $2,019 and the barrel price of Brent oil closed the week at $83.1, up 6 percent due to rising geopolitical tensions in the Middle East.
The New York Stock Exchange followed a positive trend
The New York Stock Exchange ended the week higher thanks to the positive signals it received from macroeconomic data released in the US last week.
While the U.S. manufacturing Purchasing Managers’ Index (PMI) beat expectations and hit its highest level in 15 months in January at 50.3, the data suggested that the manufacturing sector had re-entered expansion zone.
While this situation was interpreted as continued strong economic activity in the country, the gross domestic product (GDP) in the United States increased by 3.3 percent annually in the October-December 2023 period, exceeding expectations.
The country’s private consumer spending rose 0.7 percent in December last year, exceeding expectations. The core personal consumption expenditure price index, which excludes food and energy items, rose 0.2 percent on a monthly basis and 2.9 percent on an annual basis over the same period.
While the number of people filing for unemployment benefits for the first time in the U.S. rose to 214,000 in the week ended Jan. 20, beating expectations, the country’s goods trade deficit narrowed 1 percent on a monthly basis to 88 in December last year .5 billion dollars.
Wholesale stocks rose 0.4 percent to $897.7 billion in December, marking their first increase since November 2022. Retail stocks also rose 0.8 percent to $803.3 billion.
While new home sales in the US rose 8 percent to 664,000 on a monthly basis in December last year, beating market expectations, the country’s pending home sales index also recorded its highest monthly increase since June 2020 at 8.3 percent in December last Year.
In contrast, sales at Intel, one of the world’s largest microchip manufacturers, exceeded expectations with an increase of 10 percent in the final quarter of last year. On the other hand, the company’s first quarter forecasts were below market expectations, leading to increased selling pressure in the futures markets.
While Microsoft shares rose more than 1 percent during the week to reach $405.63, the company’s market value exceeded $3 trillion for the first time.
With these developments, the New York Stock Exchange’s Nasdaq index ended the week with a gain of 0.94 percent, the S&P 500 index with a gain of 1.04 percent and the Dow Jones index with a gain of 0.65 percent .
The Dow Jones index rose to 38,109.43 points, marking its highest closing level ever.
For the week beginning January 29, the Dallas Fed manufacturing activity index will be announced on Monday, the CB consumer confidence index on Tuesday, the Fed interest rate decision and the ADP employment report on Wednesday, and non-farm employment data will be announced on announced Friday.
All eyes are on inflation data in Europe
A positive trend also emerged on the European stock markets last week.
The European Central Bank (ECB) left all three key interest rates constant last week.
In her statement after the meeting, ECB President Christine Lagarde said there was consensus within the Governing Council that it was “too early” to talk about cutting interest rates.
Lagarde pointed out that short-term economic indicators remain weak, stressing that there will be an improvement in the economy in the medium term and that the labor market, which is the main reflection of the economy, remains quite strong.
Lagarde explained that the general downward trend in inflation rates in the euro zone continues and that restrictive monetary policy continues to have a widespread impact on the real economy.
Analysts said there is a 64 percent chance the ECB could begin its first rate cut in April, and said manufacturing PMI data released across the region pointed to a recovery However, the decline continues.
With these developments, the DAX index in Germany was at 2.5 percent last week, the FTSE 100 index in the UK at 2.3 percent, the CAC 40 index in France at 3.6 percent, the MIB 30 index in Italy at 0.06 percent and the British FTSE The value of the FTSE 100 index rose by 2.3 percent. The FTSE 100 index gained 2.3 percent in value.
Next week we’ll be tracking Q4 Eurozone GDP on Tuesday, Germany CPI on Wednesday, and Eurozone CPI and the BoE interest rate decision on Thursday.
The money markets have priced in that the BoE will not change the key interest rate at the meetings in February and March, but will make the first rate cut in May with a probability of 60 percent.
A buying-oriented trend was observed on the Asian stock markets, with the exception of Japan.
Asian stock markets followed a buying trend last week, with the exception of Japan.
The Bank of Japan (BoJ) did not change its ultra-loose monetary policy as expected. Although Japan’s Nikkei 225 index rose to its highest level in 35 years following the decision, BoJ Governor Ueda Kazuo’s statements increased market volatility.
While Ueda said he had made significant progress toward achieving the inflation target, these statements were perceived by markets as a “hawkish” stance.
Following Ueda’s comments, Japan’s 10-year bond rate rose to 0.72 percent, while the Nikkei 225 index ended the week lower from its 35-year high due to increasing selling pressure.
Analysts noted that possible restrictive steps in the coming period have reduced risk appetite in the country and reported that stock markets in Japan may be more sensitive to negative news in the coming period.
Inflation data announced in Japan raises questions about the BoJ’s future policy. While the CPI fell well below expectations, rising 1.6 percent in January, analysts said slowing inflation could postpone the BoJ’s normalization steps.
Last week, the People’s Bank of China (PBoC) kept interest rates stable. Although the Shanghai Composite Index fell to its lowest level since April 2020 following the interest rate decision, news that the Chinese government would announce new stimulus packages to boost the economy offset losses in the country’s stock markets.
PBoC President Pan Gongshan’s statements were another factor that had a positive impact on the markets in China.
Pan said that the required reserve ratio for banks and credit institutions will be reduced by 50 basis points from February 5 and that the decision, which aims to provide sufficient cash to the market, is expected to raise one trillion yuan (about 140 billion euros). ) is released dollars) of cash assets.
Analysts said concerns about economic activity in the country have been impacting asset prices for some time, saying the move in question could reduce deflationary pressures in the country and increase risk appetite.
The share buyback by Jack Ma, the founder of Alibaba Group Holding, also supported the upward trend.
In light of these developments, the Hang Seng Index in Hong Kong gained 4.20 percent on a weekly basis, the Shanghai Composite Index in China gained 2.75 percent, the Kospi Index in South Korea gained 0.23 percent and the Nikkei 225 Index in Japan 0 Percent. It lost .59 in value.
For the week starting January 29, Japan’s unemployment rate will be monitored on Tuesday, Japan’s industrial production on Wednesday, and China’s Caixin manufacturing PMI data on Thursday.
The domestic markets developed positively
Domestically, the BIST 100 index, which followed a buying-oriented trend last week, closed the week at 8,346.28 points, up 4.37 percent.
The Central Bank of the Republic of Turkey (CBRT) increased the key interest rate by 250 basis points to 45 percent.
The CBRT’s announcement said: “The Board concluded that the required level of monetary tightening to reduce inflation has been achieved and that level will be maintained for as long as necessary.” Statements were recorded.
Analysts said that the rate hike process may be over, but the CBRT may continue its current restrictive monetary policy until there is a significant slowdown in inflation.
On the other hand, the bill approving the Protocol on Sweden’s Participation in the North Atlantic Treaty (NATO) was adopted in the General Assembly of the Turkish Grand National Assembly. The US State Department reported that it had sent its official notification to Congress that the sale of F-16s to Turkey was appropriate.
Dollar/TL ended the week at 30.3224, 0.4 percent above the previous close.
Analysts said that technically, in the BIST 100 index, the 8,350 and 8,400 points could stand out as resistance and 8,200 and 8,100 points as support.
Next week’s domestic data agenda will feature the economic confidence index on Tuesday, the foreign trade balance on Wednesday and the manufacturing PMI data on Thursday.