Geopolitical risks and central bank decisions are expected in global markets

While global markets followed a mixed course this week due to the effects of rising oil prices and rising bond interest rates due to the USA intensifying its attacks on Iran, all eyes turned to the inflation data to be announced in the USA next week and the interest rate decision of the European Central Bank (ECB).

The increase in oil prices due to the renewed US attacks on Iran and the selling pressure in the bond market caused a volatile course in global markets.

This week, the US 10-year bond interest hit the highest level since November 2023 at 4.82 percent, and the US 2-year bond rate hit the highest level since January 2025 at 4.42 percent.

The US 10-year bond rate closed the week at 4.79 percent, with an increase of 6 basis points.

The statements of the US Federal Reserve (Fed) officials were among the factors that reduced the risk perception in global markets, albeit to a limited extent.

New York Fed President John Williams stated that inflation in the USA continues to slow down, thanks to the weakening of the effect of customs duties and the fact that high energy prices do not spread to other service sectors.

Fed Board Member Christopher Waller also said that he may support keeping interest rates steady at this month's monetary policy meeting if economic data confirms that inflation pressures have eased.

Despite these developments, the non-farm employment data announced in the USA came in above expectations, causing the expectations that the Fed will increase interest rates to increase again and the stock markets to fall on the last trading day of the week.

While non-agricultural employment in the USA increased by 162 thousand people in August, above expectations, the unemployment rate remained unchanged at 4.1 percent.

An upward revision was made in the June and July data regarding non-agricultural employment. Thus, total employment for June and July was 55 thousand people higher than previously announced.

On the other hand, US President Donald Trump, sharing on his social media account, emphasized that employment data tripled all estimates except his own and stated that interest rates should be reduced.

Due to the ongoing geopolitical risks originating from the Middle East, the barrel price of Brent oil for November delivery increased by 6.4 percent to 96.4 dollars this week.

With the expectations of the Fed's interest rate increases, the ounce price of gold completed the week at 4 thousand 430 dollars with a decrease of 0.6 percent.

As concerns about the financial situation of the USA continued, the dollar index decreased by 0.5 percent to 99.2.

Inflation data to be announced next week in the USA is expected to be decisive on market pricing.

New York stock market was mixed

The New York stock market was mixed on expectations that the Fed may raise interest rates this month.

On a weekly basis, the S&P 500 in the New York Stock Exchange gained 0.09 percent, the Nasdaq index gained 0.40 percent, while the Dow Jones index lost 0.27 percent.

Next week, the Producer Price Index (PPI) will be announced on Thursday, the Consumer Price Index (CPI) and the University of Michigan consumer confidence index will be announced on Friday.

European stock markets remained negative except for the UK

European stock markets were predominantly selling due to inflationary concerns arising from geopolitical risks and increases in bond yields.

In the Eurozone, PPI for July exceeded expectations by increasing by 1.6 percent monthly and 5.8 percent annually, and accelerated compared to June.

In the region, CPI rose to 3.3 percent in August due to the rapid increase in energy prices on an annual basis, reaching its highest level in nearly three years.

Sharp increases in bond interest rates and the escalation of military conflicts in the Middle East also dampened the risk appetite in European markets.

Germany's 10-year bond interest has reached its highest level since 2011, rising to 3.39 percent, the UK's 10-year bond interest has reached its highest level since 2007, at 5.29 percent, and France's 2-year bond interest has reached its highest level since 2024, at 3.21 percent.

On the other hand, the ECB's interest rate decision will be the focus of the markets next week. It is expected that the ECB will increase policy rates at its interest rate decision meeting. The main risk for the ECB is energy prices. While oil prices approached 100 dollars again due to the effects of conflicts in the Middle East, natural gas prices in Europe rose to levels not seen since 2023.

ECB Executive Board Member Isabel Schnabel said interest rates should be at higher levels.

Meanwhile, German Chancellor Friedrich Merz is expected to meet with bank officials before the ECB's interest rate decision meeting.

With these developments, this week the FTSE 100 index in England gained 0.06 percent in value, while the CAC 40 index in France lost 1.46 percent, the MIB 30 index in Italy lost 0.98 percent, and the DAX index in Germany lost 1.97 percent.

Next week, growth in the Eurozone will be followed on Monday, inflation in Germany, ECB's interest rate decision on Thursday, and industrial production in the UK on Friday.

Asian stock markets decline except Hong Kong

On the Asian side, rising energy costs and high bond interest rates pressured the markets.

Bank of Japan (BoJ) Governor Kazuo Ueda announced that the BoJ will continue to evaluate interest rate increases and will examine whether economic and price developments are consistent with expectations.

With these developments, Japan's 5-year bond interest hit the highest level since 1994 at 2.31 percent. The country's 10-year bond interest also hit the highest level since 1995 at 3.017 percent.

On a weekly basis, the Kospi index in South Korea lost 1.5 percent, the Nikkei 225 index in Japan lost 2.09 percent, the Shanghai composite index in China lost 0.27 percent, while the Hang Seng index in Hong Kong gained 0.26 percent.

Next week, growth and foreign trade balance will be followed in Japan on Tuesday, inflation in China on Wednesday, and industrial production in Japan on Friday.

CBRT's interest rate decision and balance of payments will be followed domestically

Domestically, the BIST 100 index at Borsa Istanbul, which followed a sales-oriented trend this week, closed at 14,012.42 points, with a decrease of 4.30 percent on a weekly basis.

Dollar/TL also completed the week at 48.4320, 0.40 percent above the previous weekly closing.

Next week, the treasury cash balance will be followed on Monday, the interest rate decision and industrial production of the Central Bank of the Republic of Turkey (CBRT) on Thursday, and the balance of payments and market participants survey on Friday.

Economists participating in AA Finance's expectation survey expect the CBRT to keep the policy rate constant at 37 percent in September.

The median year-end policy rate expectations of the economists participating in the survey was calculated as 35 percent.