Macroeconomic data and interest rate expectations in the US and global markets

Macroeconomic data announced in the USA continues to be decisive on the direction of global markets. The US economy grew above expectations with 2.2 percent on an annualized basis in the second quarter of this year. Preliminary estimates had predicted that the economy would grow by 1.5 percent in this period.

The core personal consumption expenditures price index, which the Fed closely monitors as an inflation indicator and excludes food and energy items, increased by 0.2 percent on a monthly basis and 3 percent on an annual basis in August.

Market expectations were for the core personal consumption expenditures price index to increase by 0.3 percent monthly and 3.3 percent annually. The index increased by 0.1 percent monthly and 3 percent annually in July.

While personal consumption expenditures in the country increased above expectations with 0.9 percent on a monthly basis in August, personal incomes increased below expectations with 0.2 percent. Private sector employment in the USA increased by 90 thousand people in September, exceeding market expectations.

Analysts stated that the latest data from the USA re-strengthened the scenario in the markets that the Fed may make a "soft landing" in its policy.

Stating that there is a downward movement on the inflation side in the USA, but on the other hand, the country's economy is still resilient, analysts said that the Fed may not have to increase interest rates in the near future.

Analysts noted that the non-farm employment data to be announced tomorrow in the USA is the most important data that will shape expectations regarding the Fed's policies.

Core personal consumption expenditures price index data also supported optimistic predictions that the Fed will not rush to raise interest rates. In the pricing in the money markets, predictions that the Fed will increase interest rates in October decreased from 70 percent to 38 percent.

On the other hand, the fact that the reflection of the increased diesel prices, especially in the USA in September, has not yet been seen in the data causes continued uncertainties about whether inflationary pressures will decrease or not.

Despite the low inflation data, better-than-expected growth and ADP private sector employment data continue to predict that long-term interest rates will remain at high levels. This situation suppresses risk appetite in global markets.

The fact that personal consumption expenditures exceeded expectations also strengthened the expectations that the US economy could withstand high interest rates.

With these developments, the US 10-year bond interest, which saw the highest level since 2007 with 5.31 percent, stabilized at 5.28 percent, and the US 30-year bond interest, which saw the highest level since 2002 with 5.65 percent, stabilized at 5.62 percent.

Although the Fed's interest rate hike expectations have decreased in October, expectations that it will continue these increases in subsequent meetings are effective in the rise in bond interest rates.

Supported by the rise in bond interest rates, the dollar index reached its highest level since June 24 with 101.7 today.

An ounce of gold is traded at 4 thousand 184 dollars with an increase of 0.7 percent. The barrel price of December delivery Brent oil decreased by 1.4 percent to 96.6 dollars.

On the other hand, US President Donald Trump stated that former Fed chairman Jerome Powell should be forced to resign from the Board of Directors due to cost overruns in the Fed buildings renovation project.

On the other hand, Trump, who made an announcement about energy investments at the White House, stated that South Korea plans to invest up to 200 billion dollars in major energy projects in the USA.

Trump stated that he was considering the option of banning diesel exports, but that this could have a negative impact on gasoline prices.

In addition to these developments, the statements of Fed officials are also followed closely. Fed Board Member Lisa Cook stated that inflation has been above the target for more than five years and said, "I remain determined to return inflation to our targeted level while maintaining the strength in the labor market." he said.

Meanwhile, the Fed has finalized the changes it made to increase the transparency and public accountability of the stress tests it subjects banks to and to reduce the volatility in capital requirements associated with stress tests.

NEW YORK STOCK EXCHANGE FOLLOWED A MIXED COURSE YESTERDAY

The New York Stock Exchange finished the day with a mixed course due to the selling pressure in the bond market, despite the inflation data coming in below expectations.

After US chip company Micron Technology's balance sheet came in better than expected, its shares rose 0.6 percent in after-market trading. The average interest rate for a 30-year mortgage (home loan) in the US rose to 7.3 percent last week, reaching its highest level since November 2023.

With these developments, the Dow Jones index decreased by 0.86 percent, the S&P 500 index decreased by 0.25 percent, and the Nasdaq index gained 0.24 percent.

Index futures contracts in the USA started the day positively.

EUROPEAN STOCK EXCHANGES CLOSED WITH A DECLINE

European stock markets were negative yesterday as the increase in energy costs triggered inflationary concerns, which increased the pressure on the bond market.

Annual inflation in Germany exceeded expectations and rose to 3.3 percent in September, reaching the highest level since December 2023, as the escalating conflicts in the Middle East triggered energy costs.

With this data, predictions that the European Central Bank (ECB) will continue its tight monetary policy to control inflation have gained strength.

On the other hand, the Gross Domestic Product (GDP) in England increased by 0.5 percent in the second quarter of the year, above expectations, compared to the previous quarter. On an annual basis, it was observed that UK GDP increased by 1.4 percent in the second quarter, above expectations.

With this data, it is estimated that the Bank of England (BoE) will increase interest rates with an 85 percent probability based on the pricing in the money markets.

With these developments, the FTSE 100 index in England lost 0.29 percent, the DAX 40 index in Germany lost 0.79 percent, the CAC 40 index in France lost 0.89 percent and the FTSE MIB index in Italy lost 0.84 percent.

Index futures contracts in Europe started the day negatively.

ASIAN STOCK EXCHANGES ARE POSITIVE

Asian stock markets are following a positive trend as interest rate hike expectations for the Fed decline and Micron Technology's better-than-expected balance sheet has a positive impact on the shares of chip companies in Japan and South Korea.

On the macroeconomic data side, Japan's manufacturing industry Purchasing Managers Index (PMI) for September was realized as 54.1, meeting expectations.

South Korea's exports exceeded expectations by increasing 83.5 percent on an annual basis in September. The increase in the country's exports was influenced by the fact that semiconductor shipments reached a record level as global artificial intelligence investments continued to increase chip demand.

With these developments, the Nikkei 225 index in Japan gained 2.9 percent and the Kospi index in South Korea gained 1.2 percent.

There is no trading in the Chinese and Hong Kong markets today due to the holiday.

STOCK EXCHANGE COMPLETED THE DAY WITH A DECLINE

BIST 100 index at Borsa Istanbul, which followed a sales-oriented trend yesterday, finished the day at 11,947.18 points, losing 2.79 percent of its value.

The October futures contract based on the BIST 30 index in the Borsa Istanbul Futures and Options Market (VIOP) lost 0.66 percent of its value in last night's session compared to the normal session closing.

While Dollar/TL completed the day horizontally at 49.0113 yesterday, it is traded at 49.0360 at the opening of the interbank market today, 0.1 percent above the previous closing.

On the other hand, the Capital Markets Board (CMB) decided to make an interim payment to all participation share holders whose reconciliation has been completed in the funds established by Tera, Pusula, Atlas and Hedef Portföy Yönetimi AŞ and in the liquidation process, as an offset to the payment they will be entitled to as a result of the liquidation.

Analysts stated that an intensive data agenda will be followed today, including weekly money and bank statistics, manufacturing industry PMI in the country, and global manufacturing industry PMI abroad, and noted that technically, 11,800 and 11,700 points in the BIST 100 index are support, and 12,100 and 12,200 points are resistance.