Global financial markets finished the day that started negative yesterday with optimism. On the first working day of the week, after two policy makers from the FED’s side, which demoralized the markets regarding the interest rate outlook, FED Chairman Powell, who spoke yesterday, did not give any hints about the future tightening plans of the FED, which again provided relief to the markets.
From this point on, the markets will now follow the inflation data that will be announced in the USA tomorrow. As it will be remembered, consumer inflation in the USA, which rose to 9.1% in June and tested the peak of the last 40 years, started to cool down with the measures taken by the FED and reached 7.1% in November. The headline data to be announced on Thursday is 6.5% on an annual basis; Core inflation is expected to decline to 5.7%.
A better-than-anticipated data situation will reinforce the view that inflation has peaked and the expectation that the FED will take its foot off the accelerator, thereby increasing the risk appetite. We have been repeating frequently lately that the markets and the FED are not in line. More precisely, the markets do not believe in the FED. In order not to loosen the reins at the FED (not to lose credibility in the fight against inflation), it keeps its tone high. While the markets are certain that the FED will raise interest rates by 25 basis points at its regular policy meeting, which will conclude on February 1, the final interest rate (terminal rate) seems to be slightly below 5% until June.
U.S. stock markets finished the night higher, as President Powell did not say anything that would upset the markets yesterday. The Nasdaq index, in which technology stocks come to mind when risk appetite is mentioned, rose 1% and took the lead. While we wait for the inflation data to be announced on Thursday to determine the next direction of movement around the 1.0740 level, which we highlighted against the EUR dollar, we see that the gold-silver ratio continues to progress in favor of gold, while the precious metals finished the day flat on the condition of maintaining their positive outlook. We found it undesirable for silver to go above the 79 level of the ration. The rise in the ration indicates that to get 1 ounce of gold, you need to give more silver (79).
After the barrel price of Brent oil finished the first week of the year with a decline, it met the second week at the level of 80 dollars/barrel as China opened its borders after covid (increased demand). Technically speaking, we are waiting in ambush on the oil front, below the $77 level, towards the $63 level, to be in a buyer position. The coin of the resistance has been oscillating around the $17,000 level for weeks before Bitcoin has yet awakened from hibernation, while Coinbase announced yesterday that it has cut nearly 950 people, or 20% of its workforce, as part of a restructuring plan for the cryptocurrency exchange, marking the third round of layoffs since last year. He said he was going to fire!
On the Turkish front, while the exchange rate and bond interest rates were calm yesterday, Borsa Istanbul, which showed signs of running out of fuel, finished the day in dark red. While the main index fell by 3.5%, banking shares fell by 4.5% following the authority’s obligation to issue additional bonds to banks with more than 50% foreign currency deposits on their balance sheet. As we mentioned in our annual report, the $300 levels (50% correction from the high to the low) for the stock market index in dollar terms was clearly a good signal for us. The Stock Exchange 100 index, which is roasting its own liver with its internal dynamics – rising with domestic investors fleeing inflation – had recently reached the point of overbought. In fact, to go a step further, we worry that it will be the small investor caught in the herd mentality in an environment where foreign investors are selling $4 billion worth of stock in 2022 and even shareholders are selling shares.
Although there was no market reflection, the industrial production index in Turkey, announced yesterday, fell for the first time since the pandemic in November, falling by 1.3% on an annual basis and by 1.1% on a monthly basis. Frankly, it was not surprising for us, as PMI, consumer confidence index and electricity consumption were also pointing to a slowdown. On the other hand, while the World Bank cut its global growth forecast for 2023 from 3% to 1.7%, it stated that possible new shocks will cause recession. The forecast for 2023 for Turkey, on the other hand, decreased by 0.5 points to 2.7%.
At the start of the new day, Asian stocks were also relieved after Fed Chairman Powell refrained from talking about interest rate policy in his speech, but said that the FED should be independent in the fight against inflation. The benchmark index Tokyo stock market is trading 1% higher. Futures in the US stock markets are showing a horizontal course. Although the eyes are on the US inflation data that will be announced tomorrow, today’s data calendar includes the current account balance inside, the UK industrial production and the US Michigan University consumer confidence index on the outside.