A busy data agenda will be followed next week, mainly the country’s balance of payments and industrial production index, as well as inflation in the US, China and Germany overseas.
Global markets, guided by geopolitical risks, better-than-expected macroeconomic data and corporate financial results last week, will be followed next week with a busy data agenda, mainly the country’s balance of payments and industrial production index, as well as inflation in US, China and Germany in the Abroad.
Global stock markets started the week on a stalemate as US House Speaker Nancy Pelosi visited Taiwan despite China’s threats, including military retaliation.
After the above development, risk perception increased with China taking what can be described as economic sanctions decisions against Taiwan and launching a large-scale military exercise.
On the other hand, the fact that the Purchasing Managers’ Index (PMI) data for the global manufacturing and services sectors was released and the company’s financial results came in better than expected helped investors’ risk appetite recover and stock markets declined were not permanent.
“SURPRISED RECOVERY”
Equity markets ended the week on a level foot as last week’s much-anticipated jobs data, which has been described as key evidence of whether or not the US technical recession is real, came in well above expectations and pointed to a “surprise” recovery the labor market.
With all of these developments, the New York stock market and European stock markets were up an average of 2.2 percent on a weekly basis, while Asian stock markets were mixed.
Bond market selling gained momentum after US nonfarm payrolls data, as the US 10-year bond yield started the week at 2.65 percent and ended the week at 2.83 percent. Meanwhile, the dollar index rose 0.7 percent on a weekly basis to 106.6.
Gold’s price per ounce tested its highest level in a month at $1,795, while the price of Brent oil per barrel fell to $92.2, its lowest level since Feb. 21.
UNEMPLOYMENT RATE RETURNED TO PRE-EPIDE LEVELS
Last week, eyes turned to jobs data, as highlighted by business officials, after the technical recession gripped as US GDP data fell for two straight quarters last week.
Employment in the country’s nonfarm sectors rose by 528,000 in July, according to data released today by the US Department of Labor.
Nonfarm payrolls data, which doubled market expectations, was expected to rise by 250,000 people over the period.
The unemployment rate in the country also fell from 3.6 percent to 3.5 percent in the same period. Both nonfarm payrolls and the US unemployment rate returned to pre-pandemic levels in February 2020.
GROWTH IN THE SERVICE INDUSTRY
In contrast, the US Supply Management Institute’s (ISM) Non-Manufacturing Index, released earlier this week in the US, hit 56.7 in July, a three-month highest, indicating growth in the service sector.
Factory orders in the country also rose 2 percent in June, beating expectations, showing the manufacturing sector is maintaining strength in the high-yield environment.
Analysts said that the jobs data provided the strongest evidence the economy was not in recession, facilitating rate hikes by the Federal Reserve (Fed).
Citing investors’ expectations that interest rates will continue to rise rapidly, analysts said this situation has accelerated the rise in bond yields and fueled demand for the dollar.
RATE RISE EXPECTED
Analysts said the Fed is expected to hike rates by 50 basis points with a 33.5 percent probability and 75 basis points with a 66.5 percent probability at the September money market pricing meeting after the jobs data.
With these developments, the Nasdaq Technology Index was up 4.07 percent, the S&P 500 Index was up 1.79 percent and the Dow Jones Index was down 0 percent on a weekly basis on the New York Stock Exchange, reflected in the company’s published data and financial results gained 84 during the week despite the increased volatility in stock markets on Friday last week.
Next week investors will be following US inflation data for July. The data, which hit 9.1 percent in June, the highest since November 1981, is expected to decline to 8.7 percent in July.
HIGHEST RATE INCREASE IN 27 YEARS BY BOE
On the European side, where sanctions continued to be announced amid tensions between Russia and Ukraine and energy price news continued to dominate the agenda, the Bank of England’s rate hike was on the agenda last week.
As expected, the BoE hiked interest rates by 50 basis points to 1.75 percent.
In a bid to control rising inflation, the bank signed the largest rate hike at a time since 1995, and with the final move, the policy rate rose to its highest level since December 2008.
The bank revised upwards its inflation expectations, forecasting that inflation would peak at 13.2 percent in the final quarter of the year. The bank’s economic expectations, on the other hand, point to a long-term recession that began in the last quarter of the year and will last until mid-2024.
While sterling depreciated against the dollar and euro on recessionary expectations, UK bond market yield curves inverted.
European equity markets followed a positive trajectory as manufacturing PMI data came in above expectations and financial results, particularly for the banking sector, were welcomed throughout the week.
Although indices turned negative on Friday with US nonfarm payrolls data, Germany’s DAX 40 index rose 2.20 percent, France’s CAC 40 index rose 2.10 percent and the UK’s FTSE 100 index rose up 1.29% on a weekly basis. .
In the week that the euro/dollar parity followed a fluctuating course in the 1-1.03 range, the sterling/dollar parity closed at 1.2073, down 0.9 percent.
Next week investors in Europe will follow Eurozone industrial production and the Sentix Confidence Index, as well as German inflation and UK growth and industrial production.
INCREASING GEOPOLITICAL TENSIONS SET THE AGENDA
Concerns about potential economic sanctions imposed on Taiwan, which is one of the world’s top chipmakers, as well as the US and China’s largest economies, rose after US House Speaker Pelosi’s visit to Taiwan.
Although developments fueling recession concerns in a global economy increasingly fragile as a result of the Russia-Ukraine war appear to have receded, news of China’s ongoing military exercise continues to draw close attention.
While last week saw Asia price in line with global risk sentiment on a weak data agenda, stock market investors were seen to be “cautious” on geopolitical developments.
On the other hand, volatility was supported by the financial results announced by Chinese e-commerce giant Alibaba, although its earnings met expectations.
As a result of these developments, China’s Shanghai Composite Index and Hong Kong’s Hang Seng Index fell 2.04 percent on a weekly basis, while Japan’s Nikkei 225 Index fell 1.30 percent and India’s Sensex Index fell 2.69 percent on a weekly basis rose.
The macroeconomic data agenda to be released in Asia next week includes inflation and trade balance data in China.
DOMESTIC RECORD ON THE EXCHANGE RECORD
According to data released by the Turkish Statistical Institute (TUIK) last week, the consumer price index (CPI) rose by 2.37 percent monthly and 79.6 percent annually in July.
Economists participating in the AA Finans survey had predicted the CPI would rise 3.4 percent in July. Using this average, annual inflation was calculated to rise to 81.42 percent in June.
The Monthly Price Development Report on below-expected data released by the Central Bank of the Republic of Turkey (CBRT) found that annual consumer inflation rose in all subgroups except energy in July, with the largest contribution to the said increase coming from the Core goods group with 1.44 points.
While the company’s second-quarter financial results, announced as part of the country’s accounting season, continued to beat expectations, the BIST 100 index broke a record on Borsa Istanbul on high global risk appetite.
While the index was up 6.10 percent on a weekly basis and broke the closing record at 2,750.49 points, it held its all-time high at 2,762.95 points. Dollar/TL, on the other hand, ended the week at 17.9097, floating in the 17.86-18.09 range.
As next week’s data on the balance of payments and industrial production indexes come to the fore, analysts say expectations about monetary policy from global central banks and comments from Fed officials could add to volatility. (AA)
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