A moving week in the markets: What will be the interest rate decision of the Fed and CBRT?

In the USA, which has been in the dilemma of inflation and recession for a long time, inflation concerns have begun to recede, albeit to a limited extent. According to the data released during the week, the Consumer Price Index (CPI) in the USA decreased by 0.1 percent monthly in December and increased by 6.5 percent on an annual basis. Analysts said that despite the softening in inflation, the relatively high level of rents and the strong course of labor market indicators eroded the upward movement in the stock markets.

Fed to announce rate decision

With the aforementioned data flow, the US Federal Reserve (Fed) members also gave verbal guidance, while the expectations in the money markets that the bank would raise interest rates by 25 basis points next month exceeded the 90 percent level. st. Stating that the labor market is strong, Louis Fed President James Bullard said that despite the slowdown in CPI, inflation is still high and well above the Fed’s target, and that he would prefer this to be done as soon as possible if the interest rate is to rise above 5 percent. Richmond Fed President Thomas Barkin also stated that the 2 percent inflation target must be met in order for the Fed to maintain its credibility, and said that there is no need for aggressive increases in interest rates like last year due to the slowdown in inflation. Philadelphia Fed President Patrick Harker stated that the worst of the increase in inflation is probably behind and it is time for the Fed to move on to 25 basis point rate hikes in future interest rate decisions. Analysts stated that the intense macroeconomic data to be announced around the world next week will have an impact on the direction of the markets, and that the verbal guidance of the Fed members will continue to be in the focus of investors. Pointing out the importance of the clues regarding the steps to be taken by the Fed after February, analysts stated that the expectations that the Fed may pause interest rate hikes in March have started to strengthen after the weakening inflation in the markets.

Highest level since May 2022

On the commodity side, positive expectations for the Chinese economy supported oil and copper prices, while the ounce price of gold reached its highest level since May 2022 with the predictions that the Fed may soften in its hawkish policies. Last week, the price of Brent oil per barrel rose 8.9 percent to $85.6, copper rose 7.9 percent to $4.1 per pound, and gold rose to $1,920.7 per ounce with a premium of 2.9 percent.

In the USA, eyes turned to the Fed’s Beige book report and balance sheets

While the stock markets in the USA followed a positive course last week, the intense data agenda, especially the Fed’s Beige Book Report, which will be announced on Wednesday next week, became the focus of investors. Although the macroeconomic data announced in the country alleviates the inflation concerns for now, the inflation does not seem to have calmed down in the USA yet. Analysts stated that the Fed’s Beige Book Report will look for clues about the future of monetary policy and noted that economic signals are expected to have an impact on asset prices in the intense data calendar. Noting that the fourth quarter balance sheet period has begun in the USA, analysts reported that the first financial results announced were mostly below expectations. Last week, the S&P 500 gained 2.67 percent, the Nasdaq index 4.82 percent and the Dow Jones index 2 percent in the New York stock exchange. In the data calendar of the week starting with January 16, Tuesday’s New York Fed industrial index, Wednesday, retail sales, Producer Price Index (PPI) industrial production and capacity utilization, Thursday’s construction permits, housing starts and Philadelphia Fed manufacturing index and second-hand home sales on Friday. will be done.

Messages to be given by ECB President Lagarde in Europe are in the focus of investors

A positive trend was observed in the European stock markets, with energy prices declining with the effect of air temperatures that were above seasonal normals last week and the removal of the new type of coronavirus (Kovid-19) measures in China, one of the most important commercial partners of the region. Analysts said that together with the intense macroeconomic data to be announced across the region next week, the monetary policy messages in the speeches of European Central Bank (ECB) President Christine Lagarde on Thursday and Friday may increase the volatility in asset prices. Pointing out that the leading inflation data announced in the region was realized below expectations and the risk appetite in the markets increased, analysts stated that the expectations of the investors that the ECB might soften the hawkish stance in the monetary policy were strengthened. Analysts reported that the fourth quarter balance sheet period, which started in the region, may increase the volatility in the markets. According to the data released during the week, while industrial production in the Euro Area exceeded expectations with an annual increase of 2 percent, the foreign trade deficit was realized well below the estimates with 11.7 billion euros. Last week, the FTSE 100 index increased by 1.88 percent in the UK, the CAC 40 index increased by 2.37 percent in France, the DAX index increased by 3.26 percent in Germany and the MIB 30 index increased by 2.40 percent in Italy. Next week, unemployment in the UK, CPI and ZEW expectation indices in Germany, CPI in the UK and Eurozone on Wednesday, and PPI in Germany on Friday will be followed.

In Asia, eyes turned to BoJ

While the Asian stock markets followed a buying-heavy course last week, the next week’s eyes were turned to the monetary policy decisions of the Bank of Japan (BoJ). Volatility continues in bond markets as the BoJ makes its second unscheduled bond purchase this month as Japan’s 10-year bond yield exceeds 0.5 percent. Analysts noted that the rumors in the markets that the BOJ may increase the volatility range of bond interest rates at the meeting to be held next week were effective in the rise in Japanese bond yields, and stated that the bank is not expected to make any changes in the policy rate. During the week, the expectations that China will lift the measures in the new type of coronavirus (Kovid-19) epidemic and that it will support the economy supported the stock markets. The South Korean Central Bank increased its policy rate by 25 basis points to 3.50 percent today, in line with expectations. According to the data announced in the region, Tokyo CPI in Japan increased by 4 percent year-on-year, far surpassing expectations, while the increase in question pointed to the strongest inflation in the last 41 years. While dollar-based exports in China decreased by 9.9 percent annually in December, foreign trade surplus exceeded expectations with 78 billion dollars. With these developments, the Nikkei 225 index in Japan rose 0.56 percent, the Shanghai composite index in China rose 1.19 percent, the Hang Seng index in Hong Kong rose 3.56 percent and the Kospi index in South Korea rose 4.20 percent on a weekly basis. . In the data calendar of the week that started with January 16, the data on growth, industrial production and retail sales in China on Tuesday, industrial production and capacity utilization rate in Japan on Wednesday, foreign trade balance in Japan on Thursday and inflation in Japan on Friday will be followed.

CBRT to announce interest rate decision

While the BIST 100 index in Borsa Istanbul finished the week at 4,984.86 points, decreasing by 6.68 percent due to the ongoing selling pressure last week, eyes were turned to the monetary policy decisions of the Central Bank of the Republic of Turkey (CBRT) on Thursday. Dollar/TL closed the week at 18.7849, 0.33 percent above the previous weekly closing. Analysts said that in the BIST 100 index, technically, 4.900 and 4.700 levels can stand out as support, and 5,000 and 5.100 points as resistance. Next week, domestic budget balance on Monday and housing sales and housing price index data on Tuesday will be followed.