Global Markets Cautiously Begin Intensive Data Week

Global markets started the week cautiously as a data-heavy macroeconomic calendar, especially focusing on inflation in the United States, is expected to be followed.

Last week, strong economic indicators in the U.S., particularly the positive employment data, supported the “soft landing” scenarios for the country’s economy. Additionally, companies worldwide continued to exceed profit expectations, boosting investor risk appetite.

Analysts noted that last week saw new highs in the New York Stock Exchange, led by technology companies that reported better-than-expected earnings and profits for the fourth quarter. They also mentioned that the inflation data to be announced tomorrow could increase market volatility.

On Friday, the U.S. inflation data underwent revision. The U.S. Department of Labor reduced the December increase in the Consumer Price Index (CPI) from 0.3% to 0.2%. Core inflation, excluding food and energy, remained unchanged.

Analysts highlighted the downward revision in December’s inflation data, stating that this is significant, indicating sustained and sustainable reduction in inflation pressures, which is positive for the Federal Reserve (Fed) as it seeks more evidence to start reducing interest rates.

Analysts emphasized that this week’s focus is on the intensive data agenda and the verbal guidance of Fed officials. According to market expectations, there is an 83% chance that the Fed will keep interest rates unchanged in March, and a 63% chance of starting an interest rate cut in May.

Behind these developments, the yield on the U.S. 10-year Treasury bond started the week at 4.17%, and the dollar index also had a steady start at 104.

Gold, extending its downward trend for the fourth consecutive trading day, found buyers at $2,024 with a 0.1% decrease, while Brent crude oil, which has risen in the last five business days, is currently trading at $81.5 with a 0.1% decrease.

In the cryptocurrency markets, Bitcoin continued its upward trend for the seventh consecutive trading day, approaching $49,000. Thus, Bitcoin tested its highest level in almost a month.

On the last trading day of the past week, the Nasdaq index on the New York Stock Exchange gained 1.25%, achieving its highest daily closing since November 2021, while the S&P 500 index reached a new peak with a 0.57% increase. The Dow Jones index recorded a 0.14% decrease. Index futures in the U.S. started the new week with mixed movements.

In European stock markets, negative trends, except for Italy, were prominent on Friday. This week, the focus of investors has turned to a dense data agenda.

Analysts pointed out that mixed signals are received from the data in Europe, which is the region where the dilemma of inflation and recession is most felt. They stated that macroeconomic data to be announced throughout the week in the region may provide signals for the steps that central banks will take in the coming period.

Over the weekend, the European Union (EU) Council announced that an agreement had been reached on new financial rules negotiated between member countries and the European Parliament. The new financial rules aim to gradually and sustainably reduce member countries’ public debts and budget deficits.

The euro/dollar exchange rate, which has maintained its upward trend for the fifth consecutive trading day, is currently at 1.0800, slightly above the previous closing level.

On Friday, the FTSE 100 index in the UK lost 0.30%, the DAX 40 index in Germany lost 0.22%, and the CAC 40 index in France lost 0.24%. The MIB 30 index in Italy recorded a 0.28% decrease. Index futures in Europe started the new week with mixed movements.

On the Asian side, due to the New Year holiday, there was no trading in China, Hong Kong, Japan, and South Korea.

In the domestic market, the BIST 100 index in Borsa Istanbul, which followed an upward trend on Friday, completed the day with a 1.07% gain, closing at 9,045.97 points, achieving the highest daily and weekly closing in history.

After moving with an upward trend on the last trading day of the previous week, the USD/TRY started trading at 30.6980 in the interbank market.

Furthermore, last week’s Treasury and Finance Ministry auctions, together with the strong demand, played a significant role in the decline of yields well below expectations, contributing to the downward trend in Turkey’s 5-year credit default swap (CDS) risk. The CDS started the week at 311 basis points.

Analysts expressed that today’s focus in the domestic market will be on the unemployment rate, while in the international arena, the U.S. Treasury budget balance data will be followed. From a technical perspective, they mentioned that the resistance levels for the BIST 100 index are 9,100 and 9,200, while the support levels are 9,000 and 8,900 points.

The data to be followed in the markets today is as follows:

  • 10:00 Turkey, unemployment rate for December
  • 22:00 U.S., Treasury budget balance data for January

China and Japan markets are closed due to the New Year holiday.

source: prepared by Melisa Beğiç

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