Global markets follow positive course

By Muhammed Said Tanil

ISTANBUL (AA) – Global markets followed a positive course as the core personal consumption expenditures (PCE) price index soared 0.4% month-on-month and 2.8% annually in January, the lowest yearly increase recorded since March 2021, according to data released in the US on Thursday.

Considered to be the indicator of inflation, the core PCE price index continued to slow down and came in line with expectations, giving hope for the Fed’s interest rate cuts to take place in the first half of 2024, analysts say.

They added that Thursday’s weekly jobless claims exceeded estimates with 215,000, pointing to a softening in the labor market.

Following the release of the data on the core PCE price index and the weekly jobless claims, the probability of the Fed’s first interest cut went up to 25% for May and 70% for June.

The last few inflation data showed that the road to the 2% inflation target would be full of obstacles and that it would be appropriate to lower the policy rate in the summer, as stated by Raphael Bostic, president of the Fed of Atlanta.

Austan Goolsbee, the Fed of Chicago’s president, said that improvements in the supply of goods and labor in 2023 set the stage for further declines in inflation in 2024.

Goolsbee stated that even if January’s PCE data shows recovery, he suggested being cautious.

The monetary policy remains in good position, and an interest cut could be implemented if necessary since inflation could be squeezed, said Mary C. Daly, president of the Fed of San Fransisco.

Loretta J. Mester, president of the Fed of Cleveland, emphasized that there is still some work to be done for inflation, mentioning that they could not count on last year’s rate of decline in inflation to persist this year.

Meanwhile, the news from the G20 meeting in Sao Paulo, Brazil, bringing finance ministers and central bank governors together, is in the spotlight.

International credit rating agency Moody’s reported in its latest macroeconomic data that it expects G20 economic growth to fall from 2.9% in 2023 to 2.4% in 2024.

In addition, the temporary funding bill preventing the closure of the federal government in the US will be passed by the House of Representatives and the Senate, and it will be presented to President Joe Biden.

In light of these developments, following the data indicating inflationary pressures to have slowed down, the US 10-year Treasury bond yield fell 4.23%, down 10 basis points, ending the day at 4.25% on Thursday, and it stood flat on Friday.

As for the US Dollar Index, after closing the day at 104.2 on Thursday, up 0.2%, it is at 104.1 on Friday, up 0.1% compared to its previous close.
The ounce price of gold, on an upward trend for three consecutive days now, is trading at $2,046, up 0.1%, on Friday.

Brent crude oil completed the day on Friday at $81.8 per barrel, down 0.3%. However, it is up 0.4% on Friday compared to its previous close, trading at $82.

On Thursday, the Nasdaq index soared 0.90%, the S&P 500 index 0.52%, and the Dow Jones index 0.12%.

Index futures contracts in the US started Friday on a positive course.

As for the European stock markets, they followed a mixed course, as all eyes were turned to the eurozone’s leading inflation and manufacturing Purchasing Managers’ Index (PMI) data in the region.

The uncertainty over the timing of rate cuts by regional central banks continued, with released data pointing to a slowdown in economic activity.

In Germany, January’s retail sales fell 0.4% month-on-month and 1.4% year-on-year.

The leading inflation data from the country showed figures below expectations, with 0.4% monthly and 2.5% on an annual basis.
At the same time, developments and mutual statements on the Russo-Ukrainian war remain on the agenda.

The FTSE 100 index in the UK gained 0.07%, the DAX 40 index in Germany 0.44%, while the CAC 40 index in France fell 0.34 %, and the MIB 30 index in Italy 0.11% on Thursday.

Index futures contracts in Europe started Friday with a mixed course.

Despite the positive course in Asian equity markets standing out, Kazuo Ueda, governor of the Bank of Japan (BoJ), said, “We are not yet in a position to foresee the achievement of a sustainable and stable inflation target.”

Expectations that the BoJ may soon end the negative interest rate policy in the markets were postponed following Ueda’s statements, and the dollar/yen parity increased to 150.4%, up 0.4%.

The manufacturing PMI in Japan came in line with expectations with 47.2 in February, while the unemployment rate remained unchanged at 2.4%, according to data released in the country.

China saw its manufacturing and composite PMI come in line with estimates at 49.1 and 50.9, respectively, whereas the services PMI went above expectations at 51.4.

Meanwhile, the country’s Caixin Manufacturing PMI outperformed forecasts with 50.9.

Near the close, the Nikkei 225 Index in Japan soared 1.2%, renewing its peak, the Shanghai Composite index in China gained 0.1%, and the Hang Seng Index in Hong Kong gained 0.3%.

As for Türkiye, the BIST 100 Index followed a selective course on Thursday, completing the day at 9,193.69 points with a 1.45% gain in value.

The US dollar/Turkish lira (USD/TRY) exchange rate followed a buying course, as it was at 31.3100 at the opening of the interbank market on Friday, after completing the day at 31.2333, 0.1% above its previous close.

The conferences to be held on Friday between the finance minister Mehmet Simsek and Fatih Karahan, the governor of Türkiye’s Central Bank, at the G20 meeting is the focus of investors.

*Writing by Emir Yildirim