Global markets to focus on US inflation data next week

By Murat Aslan

ISTANBUL (AA) – Markets will be focused on US inflation data next week as concerns persist over global recession risks and increasing inflation due to aggressive measures being taken by central banks worldwide.

Risk perception eased somewhat this week after the UN Conference on Trade and Development and IMF chief Kristalina Georgieva warned that hawkish policies of central banks of advanced economies could damage the global economy.

During the week, macroeconomic data, especially from the US, indicated strong economic activity.

On Friday, US non-farm payrolls exceeded expectations with an increase of 263,000 in September, while the overall unemployment rate dropped to 3.5%, the lowest since February 2020.

Comments by top Federal Reserve officials, however, pointed to a continuation of the US central bank’s hawkish stance.

Philip Jefferson, a member of the Fed’s board, said inflation remains the country’s biggest challenge and it will take much more time to bring it under control.

Mary Daly, head of the San Francisco Federal Reserve Bank, said the Fed has the tools needed to reduce inflation and will use them, adding that interest rates must be increased further to achieve that objective.

Neel Kashkari, chair of the Minneapolis Fed, said more work needs to be done to tame inflation as there is “almost no evidence” that inflation has peaked in the US.

Chicago Fed head Charles Evans said the bank’s policy rate will probably be around 4.5% to 4.75% by next spring.

The probability for a 75-basis point hike by the Fed in November has now reached 81%, and 63% for another increase of 50 basis points in December.

The 10-year bond yield in the US was at 3.56% during the week but increased by seven basis points to end the week at 3.89%, the highest weekly close since March 2010.

The OPEC+ alliance’s decision to cut oil production by 2 million barrels per day starting November also dented the risk appetite in global markets.

The move spurred President Joe Biden to announce that the US will release more 10 million barrels of oil from the country’s strategic reserves next month.

The barrel price of Brent oil was up 14.7% to finish the week at $97.8, marking the end of a five-week slowdown.

Analysts expect the OPEC+ cut to trigger a surge in prices, especially as easing pandemic measures in China are set to increase demand.

The ounce price of gold increased 2.06% on a weekly basis to end the week at $1,695.

The S&P 500 index was up 1.51%, Nasdaq 0.73%, and Dow Jones climbed 1.99% this week.

On the European side, investors will be focused this week on a scheduled speech of European Central Bank (ECB) chief Christine Lagarde, as well as inflation figures, particularly Germany’s.

The ECB has signaled it will continue its aggressive interest rate hikes as it pursues a target of 2% inflation by the end of the year.

The producer price index was at a record 43.3% in the euro area in August.

This week, the UK’s FTSE 100 index was up 1.41%, Germany’s DAX gained 1.31%, France’s CAC 40 climbed 1.82%, and Italy’s MIB 30 was up 1.23%.

Markets will also follow the UK’s unemployment data next week, as well as the euro area’s industrial production and international trade figures.

In Asia, Chinese markets were closed during the week due to a bank holiday, while Japan’s Nikkei 225 was up 4.55%, South Korea’s Kospi gained 3.58%, and Hong Kong's Hang Seng increased 3%.

Japan’s annual inflation rate was at 2.8% in September, according to data released this week.

Australia’s central bank increased its policy rate by 25 basis points to 2.6% and signaled that it will persist with its hawkish stance.

In Türkiye, the BIST 100 index was up 12.19% to 3,597.6 points at the end of the week.

Türkiye’s annual inflation rate was at 83.45% in September, according to official data released this week.

* Writing by Gokhan Ergocun