Sterling was shaken after Bank of England Governor Andrew Bailey warned fund managers that the emergency bond-buying program would come to an end.
While the selling wave after the statements of the Bank of England Governor Andrew Bailey hit the US stock markets, the dollar remains strong as a safe haven.
While inflationary concerns remain at the center of the agenda due to the increase in geopolitical risks, the ongoing “zero case” practice within the scope of the epidemic in China, and the energy crisis, warnings that monetary policies implemented by central banks will lead to a recession are becoming increasingly common. With these developments, selling pressures continue in the stock and bond markets.
The International Monetary Fund (IMF), in its World Economic Outlook Report published yesterday, kept the global economic growth expectation at 3.2 percent for this year and reduced it to 2.7 percent from 2.9 percent for the next year. The Fund lowered its 2022 growth expectation from 2.3 percent to 1.6 percent for the USA, from 3.3 percent to 3.2 percent for China, while raising it by 0.5 points for the Eurozone. On the other hand, the Eurozone’s growth forecast for next year was cut from 1.7 percent to 0.5 percent.
In its report, the IMF stated that high inflation, the deterioration of the economic outlook and ongoing geopolitical risks are the main problems facing financial systems, and that the risks to financial stability have increased significantly.
BIDEN: “IT WILL BE A VERY LIGHT STAGE”
Despite IMF’s global recession warnings, US President Joe Biden stated that he did not think there would be a recession and said, “If it is, it will be a very mild recession.” US Treasury Secretary Janet Yellen also said that they are not seeing signs of financial instability in US markets at a time when concerns about rising interest rates are increasing volatility.
With these developments, a mixed course was observed in the New York stock market yesterday, while the Dow Jones index rose by 0.12 percent, the S&P 500 index decreased by 0.65 percent and the Nasdaq index decreased by 1.10 percent. The US 10-year bond yield was stabilized at 3.94 percent after seeing over 4 percent. The dollar index decreased to 113.3 today, after rising to 113.5 yesterday.
Before the minutes of the last meeting of the Fed Open Market Committee (FOMC) held on September 20-21 in the USA and inflation data, index futures contracts started the day with a new buyer.
The minutes of the last meeting, where the Fed raised the policy rate by 75 basis points for the third time to the range of 3.00-3.25 percent and signaled that its aggressive steps will continue, is expected to emphasize determination in the fight against inflation. In addition, clues will be sought regarding the authorities’ view of the recession, which has not made much assessment.
On the other hand, PPI, which decreased by 0.1 percent in August, is expected to increase by 0.2 percent monthly in September, while the annual increase in the index is expected to decline from 8.7 percent to 8.4 percent.
On the European side, the IMF’s recession warnings for the German and Italian economies, as well as the fact that the developments pointing to the financial instability in the British economy remained in existence, were the main developments that steered the stock market pricing yesterday. Statements about whether Russia will use nuclear weapons keep geopolitical developments at the center of the agenda.
Pound sterling/dollar parity exceeds 1
Yesterday, the Bank of England (BoE) expanded the temporary purchase program of long-term UK government bonds, which it started to restore market functioning, to include inflation-indexed bonds. In this context, the Bank will purchase long-term traditional government bonds up to £5 billion and inflation-indexed government bonds up to £5 billion until October 14. After the decision, the UK’s 10-year bond yield decreased from 4.75 percent to 4.44 percent, while the sterling/dollar parity rose again above 1.10 after falling to the 1.0950 limit.
In the European stock markets, on the other hand, a negative course was followed by technology stocks as recession pricing became prominent. In Germany, the DAX 40 index lost 0.43%, the FTSE 100 index in the UK decreased by 1.06 percent and the CAC 40 index in France fell by 0.13 percent. On the other hand, Euro/dollar parity is trading at 0.9720 today after falling to the lowest level in almost two weeks with 0.9672 yesterday.
On the other hand, according to the data released today, industrial production in the UK fell by 5.2 percent annually in August, falling short of expectations.
On the Asian side, evaluations regarding the effects of loose monetary policies on regional currencies occupy the agenda.
“WE WILL INCREASE YUAN FLEXIBILITY”
Stating that they will deepen the foreign exchange market reform and increase the flexibility of the yuan, the People’s Bank of China announced that they will definitely prevent large exchange rates.
On the other hand, according to the data announced today in Japan, although machinery orders increased by 9.7 percent annually in August, they remained below market expectations, while the Central Bank of South Korea increased the policy rate by 50 basis points to 3 percent in line with the expectations.
With these developments, the Hang Seng index decreased by 1 percent in Hong Kong close to the closing, while the Nikkei 225 index in Japan increased by 0.1 percent, the Kospi index in South Korea by 0.5 percent and the Shanghai composite index in China increased by 0.3 percent.
The BIST 100 index, which followed a fluctuating course in the domestic market yesterday, closed the day at 3,571.55 points with a 0.29% depreciation. Dollar/TL, on the other hand, is traded at 18.5810 at the opening of the interbank market today, after closing at 18.5590 with a decrease of 0.1 percent yesterday.
GLOBAL EQUITY MARKETS CONTINUES TO PRESSURE
Analysts said that concerns about economic activity, uncertainties about monetary policies and rising geopolitical risks continue to weigh on global equity markets.
Stating that the statements of the European Central Bank (ECB) President Christine Lagarde and the FOMC meeting minutes will be in the focus of investors today, analysts noted that industrial production in the country and PPI in the USA came to the fore in the data agenda.
Analysts pointed out that the financial results of Alcao, which will start the third quarter balance sheet period in the USA today, will also be monitored, and stated that technically, 3,450 points in the BIST 100 index are in the position of support and the level of 3.620 in the resistance position.
Economists participating in AA Finans’ survey expect the calendar adjusted industrial production index to increase by 4 percent annually in August. Economists predict that the unadjusted industrial production index will also increase by 6.6 percent annually.