Signs of economic activity and inflation are expected to influence the direction of markets in the intense macroeconomic data set to be released around the world this week.
While global markets started the new week on a mixed note and recession worries intensified after macroeconomic data announced in Asia fell short of expectations, signs of economic activity and inflation are likely to heavily influence the direction of markets in this week’s macroeconomic data be announced worldwide.
Last week, lower-than-expected inflation data in the US increased risk appetite, while dovish comments from US Federal Reserve (Fed) officials caused markets to fluctuate.
“RAISE RATES UNTIL INFLATION TAKES CONTROL”
Richmond Fed President Thomas Barkin told a TV station over the weekend to avoid the mistakes of the 1970s and keep raising interest rates until inflation is brought under control.
With the above comments on money market pricing, there has been increased uncertainty about the magnitude of the Fed’s move at its September meeting. Thus, while there is a 54 percent estimated probability that the Fed will hike rates by 50 basis points, the probability of a 75 basis point hike is 46 percent.
Statements from Fed officials this week and macroeconomic data to be released in the US, particularly retail sales, are expected to influence the direction of markets.
INTENSIVE DATA AGENDA IN EUROPE
With the developments, the S&P 500 index rose 1.73 percent on the New York Stock Exchange on Friday, the Nasdaq index rose 2.09 percent and the Dow Jones index rose 1.27 percent. Index futures contracts in the US started the new week with a limited decline.
While the stock markets followed a buoyant course last week in line with the New York stock market, the intense data agenda followed on the European side, particularly the second-quarter gross domestic product (GDP) to be announced on Wednesday in the eurozone of investors.
The data to be released in the region are expected to reflect signs of inflation trajectory to affect asset prices, while developments related to the energy supply crisis will be closely monitored.
MIXED APPEARANCE
The euro/dollar parity, which rose on expectations that the Fed might end its ultra-tightening policy last week, started the new week at 1.0250, down 0.1 percent.
On Friday, the UK’s FTSE 100 index was up 0.47 percent, Germany’s DAX 40 index was up 0.74 percent, France’s CAC 40 index was up 0.14 percent and the FTSE MIB 30 index was up 0.14 percent Italy by 0.49 percent. In Europe, where Italian markets are closed for a holiday today, index futures contracts started the new week with a mixed outlook.
On the first day of the week, Asian stock markets are choppy with an intense flow of news and data.
RISK PERCEPTION IS STRENGTHENED
Retail sales in China rose 2.7 percent year-on-year and industrial production rose 3.8 percent, but fell short of expectations.
Although this situation boosted risk perceptions in the region, the Chinese stock market managed to largely erase losses after the People’s Bank of China (PBoC) cut the 1-year lending rate to 2.75% from 2.85% despite the recession had risk.
According to data released in Japan, the country’s economy grew 2.2 percent on an annualized basis and 0.5 percent on a quarterly basis in the second quarter, lagging behind market forecasts.
On the back of these developments, Japan’s Nikkei 225 index rose 1.14 percent at close of trade, while Hong Kong’s Hang Seng index fell 0.2 percent. China Composite Shanghai Index is flat.
DOMESTIC MARKETS
The BIST 100 index, which improved its domestic record to 2,896.67 points from Friday’s highest, retreated on profit selling from those levels to end the day at 2,864.25 points, 0.15 percent below its previous close.
As monetary policy decisions by the Central Bank of the Republic of Turkey (CBRT) draw investor focus this week, stock- and sector-related volatility is expected to persist during last week’s earnings season.
After closing at 17.9363 on Friday down 0.06 percent, the dollar/TRY is trading at 17.9520 as the interbank market opens today.
Analysts explained that the data agenda is calm today, saying that technically the 2.880 and 2.900 levels in the BIST 100 index are in the resistance position and 2.830 points in the support position. (AA)
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