In global markets, eyes turned to U.S. inflation data

global stock markets, The week started off on a whim with US House Speaker Nancy Pelosi’s visit to Taiwan despite all threats from China, including the military response.

After the aforementioned development, there has been an increase in risk perception, with China taking decisions that can be described as economic sanctions against Taiwan and launching a large-scale military exercise. On the other hand, the fact that the Purchasing Managers Index (PMI) data for manufacturing and services has been announced globally and the company’s financial results have been better that expectations helped the investor’s risk appetite to recover and stock market declines were not permanent. .

Stock markets ended the week undecided as data from the jobs report, which was highly anticipated last week and described as important evidence of whether or not the technical recession in the United States is real, far exceeded expectations and indicated a “surprise” recovery. in the labor market.

With all of these developments, the New York stock market and European stock markets rose an average of 2.2% on a weekly basis, while Asian stock markets were mixed. After the data from the US Non-Farm Payrolls report, selling gained momentum in the bond market, while the yield on US 10-year bonds started the week at 2.65% and moved higher. ended the week at 2.83%. The dollar index, on the other hand, rose 0.7% on a weekly basis to 106.6.

The price of an ounce of gold tested its highest level in a month at 1,795 dollars, while the price of Brent oil per barrel fell to 92.2 dollars, the lowest level it has known. since February 21.

“Surprise” recovery of the American labor market

Last week, all eyes turned to labor market data, as economic officials pointed out, after the technical recession experienced with GDP data falling for two consecutive quarters in the United States the last week.

According to data released today by the US Department of Labor, employment in the nation’s nonfarm sectors increased by 528,000 people in July. Non-farm payrolls data, which doubled market expectations, is expected to rise by 250,000 over the period. The unemployment rate in the country also fell from 3.6% to 3.5% during the same period. Thus, non-farm employment and the unemployment rate in the United States returned to their pre-pandemic levels in February 2020.

On the other hand, the US Supply Management Institute (ISM) non-manufacturing index, which was announced in the United States at the beginning of the week, reached its highest level for 3 months with 56.7 in July, pointing to a growth in the service sector. . Factory orders in the country also rose 2% in June, above expectations, showing that the manufacturing sector is maintaining its strength in the high interest rate environment.

Analysts said the jobs data provided the strongest evidence that the economy was not in recession, providing relief from interest rate hikes by the Federal Reserve (Fed). Stressing that investors expected interest rates to continue rising rapidly, analysts said the situation had accelerated the rise in bond yields and bolstered demand for the dollar.

Analysts said after the jobs data, the Fed is expected to raise interest rates by 50 basis points with 33.5% probability and 75 basis points with 66.5% probability at the September money market price meeting.

With these developments, the Nasdaq Technology Index was 4.07%, the S&P 500 Index was 1.79% and the Dow Jones Index was 0% on a weekly basis on the New York Stock Exchange, with the effect of announced company financial data and results. during the week, despite rising volatility in equity markets on Friday last week. 84 have gone up in value.

Next week, investors will be watching US inflation data for July. The data, which hit its highest level since November 1981 with 9.1% in June, is expected to drop to 8.7% in July.

Biggest BoE rate hike in 27 years

On the European side, where the sanctions continued to be announced within the framework of the Russian-Ukrainian tension and where the news on the prices of energy remained at the center of the agenda, the rise in the interest rates of the Bank of England was on the agenda last week.

The BoE raised the key rate by 50 basis points to 1.75%, in line with expectations. In order to control rising inflation, the Bank signed the largest one-shot interest rate hike since 1995, and with the final step, the key rate rose to its highest level since December 2008. Revising its inflation expectations upwards, the bank predicted that inflation would peak at 13.2% in the last quarter of the year. The bank’s expectations for the economy, on the other hand, pointed to a long-term recession that started in the last quarter of the year and will last until the middle of 2024.

As the pound depreciated against the dollar and the euro on recession expectations, UK bond market yield curves inverted.

European equity markets trended positively as manufacturing PMI data beat expectations and financial results, particularly for the banking sector, were well received throughout the week. Although the indices turned negative with the non-farm payrolls data in the United States on Friday, the DAX 40 index in Germany rose by 2.20%, the CAC 40 index in France by 2.10% and the FTSE 100 index in the UK by 1.29% on a weekly basis. base. .

During the week when the euro/dollar parity followed a fluctuating course in the 1-1.03 band, the pound/dollar parity closed at 1.2073 with a depreciation of 0.9%.

Next week, European investors will be watching industrial production in the Eurozone and the Sentix confidence index, as well as inflation in Germany and growth and industrial production in the UK.

Growing geopolitical tension in Asian stock markets has set the agenda

Following US House Speaker Pelosi’s visit to Taiwan, concerns about possible economic sanctions that could be implemented by Taiwan, which is among the world’s largest chipmakers, and the United States and China China, the largest economy, grew. Although developments fueling recession fears in the global economy, which has become increasingly fragile with the Russian-Ukrainian war, appear to have been pushed into the background, news about China’s ongoing military exercise continues to be followed closely.

While a development in line with global risk appetite was seen last week with the weak data agenda in Asia, equity investors were observed to have acted “cautiously” due to developments. geopolitics.

In contrast, as part of the financial results announced by Chinese e-commerce giant Alibaba, although their earnings met expectations, their forward-looking messages supported volatility.

With these developments, the Shanghai Composite Index in China and the Hang Seng Index in Hong Kong fell 2.04% on a weekly basis, while the Nikkei 225 Index in Japan rose 1.30% and the Sensex index in India rose 2.69% on a weekly basis.

The macroeconomic data agenda to be announced in Asia next week includes data on inflation and China’s external trade balance.

Record after record for the country’s stock market

According to data released by the Turkish Statistical Institute (TUIK) last week, the consumer price index (CPI) increased by 2.37% per month and 79.6% per year in July. Economists participating in the AA Finans survey had predicted the CPI would rise 3.4% in July. Based on this average, annual inflation was calculated to reach 81.42% in June.

In the monthly price development report published by the Central Bank of the Republic of Turkey (CBRT) regarding the data below expectations, it was stated that annual consumer inflation increased in all sub- groups with the exception of energy in July, while the largest contribution to said increase comes from the group of basic goods with 1.44 points.

As the company’s financial results announced for the second quarter as part of the country’s balance sheet season remained above expectations, the BIST 100 index broke a record in Borsa Istanbul due to strong risk appetite worldwide.

While the index gained 6.10% on a weekly basis, breaking the closing record of 2,750.49 points, it took its all-time high to 2,762.95 points. The dollar/TL, on the other hand, closed the week at 17.9097, hovering in the 17.86-18.09 band.

With balance of payments and industrial production index data coming to the fore next week, analysts say expectations for global central bank monetary policies and statements from Fed officials could rise. volatility.

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