Global markets closed the central bank week with records

Global equity markets completed the central bank week with records, while next week, the focus of investors will be on a busy data agenda, especially growth data in the US.

Throughout the week, interest rate decisions of major central banks worldwide were at the forefront of the agenda. While some central banks kept their policy rates stable in line with expectations, others made “surprise” decisions.

The Federal Reserve (Fed) of the United States left its policy rate unchanged within expectations, leaving it at the highest level in 23 years, in the range of 5.25-5.50%, while maintaining its projection that the bank could make 3 interest rate cuts for the rest of the year, which supported risk appetite in equity markets.

Fed Chairman Jerome Powell, in a press conference following the interest rate decision, indicated that the Fed’s policy rate is probably at its peak in the current tightening cycle, reiterating that if the economy continues to perform as expected, it would probably be appropriate to start reducing interest rates at some point this year.

The increased risk appetite with these developments led to a record closing on a weekly basis in the New York Stock Exchange, while the yield on US 10-year Treasury bonds fell by approximately 8 basis points to close the week at 4.20%.

On the other hand, after the Fed kept rates steady, the sharp decline in the dollar index reversed course following the “surprise” interest rate cut by the Swiss National Bank (SNB), as concerns arose that the Fed might start interest rate cuts later than other major central banks. Thus, the dollar index closed the week at 104.4, up 0.9%.

The Fed’s maintaining its forecast of being able to make 3 interest rate cuts by the end of the year led to a peak in the price of gold at $2,222.8 per ounce, while the strengthened demand for gold following the SNB’s interest rate cut put downward pressure on the price of gold. The price of gold per ounce closed the week at $2,160, up 0.2%.

In the money markets, the possibility of the Fed making its first interest rate cut is priced at 13% in the May meeting and 75% in the June meeting.

Analysts pointed out that the growth data to be announced in the US next week could cause changes in these pricing, stating that a 3.2% increase in Gross Domestic Product (GDP) in the 4th quarter is expected in the country.

Meanwhile, geopolitical risks continue to affect oil prices, as attacks by Ukraine on Russia’s oil refineries at the beginning of the week led to a rise in the price of Brent crude oil to $87.1 per barrel.

Thus, the price of Brent crude oil, which tested its highest level since October 2023, completed the week at $85 per barrel with a 0.2% increase, as concerns about supply eased during the week and the dollar regained strength.

New York Stock Exchange sets new record
Prominent indices in the New York Stock Exchange achieved their strongest weekly closings while also renewing their peak levels.

The increased risk appetite with the expectation that the US economy could experience a “soft landing” and the Fed’s maintaining its forecast of being able to make 3 interest rate cuts by the end of the year despite strong country inflation exceeding expectations were effective in US equity markets.

Data released last week in the US continued to indicate strong economic activity in the country.

The number of new houses started in the US increased by 10.7% to 1.521 million in February, exceeding market expectations. The number of construction permits issued in the country also increased by 1.9% on a monthly basis in February to 1.518 million.

The Purchasing Managers’ Index (PMI) for the manufacturing industry in the US increased by 0.3 points to 52.5 in March, reaching its highest level in 21 months. The index, which exceeded market expectations, indicated expansion in the manufacturing sector. The PMI for the service sector in the US decreased by 0.6 points to 51.7 in March compared to the previous month.

In the US, although the Philadelphia Fed Manufacturing Index decreased to 3.2 in March, it indicated positive values for the second consecutive month, showing that expansion in the sector continued. The current account deficit in the US decreased by 15.7% last year to $818.8 billion.

Existing home sales in the US increased by 9.5% in February, exceeding expectations, recording the highest increase in the last year.

On the other hand, developments in artificial intelligence and technology continued to affect market direction, as US chip manufacturer Nvidia introduced its new artificial intelligence chip architecture called “Blackwell” last week.

Nvidia CEO Jensen Huang and CFO Colette Kress answered investors’ questions at the company’s GPU Technology Conference (GTC). Kress expressed her belief that the company’s new artificial intelligence chip would be launched by the end of the year. Huang also stated that they are pursuing approximately a $250 billion data center market.

The company’s stock price completed the week at $942.9, up approximately 7.3%, achieving its highest weekly closing of all time.

With these developments, the Nasdaq index in the New York Stock Exchange closed the week at 16,429, up 2.9%, the S&P 500 index at 5,234, up 2.3%, and the Dow Jones index at 39,476, up 2%, completing the week with gains. Thus, the indices achieved their highest weekly closings of all time while also testing new peaks.

In the week starting March 25, new home sales on Monday, durable goods orders and CB consumer confidence on Tuesday, growth and Michigan Consumer Confidence Index on Thursday, and personal income and spending on Friday will be followed.

Historical closing from DAX 40 index in Germany
In European equity markets, the DAX 40 index in Germany achieved its highest weekly closing in history last week, while the FTSE 100 index in the UK recorded its strongest weekly closing level since May 2008, and the MIB 30 index in Italy recorded its highest weekly closing level since May 2008.

Last week, while the interest rate decisions of central banks in the region were at the forefront of investors’ agenda, the Bank of England (BoE) kept its policy rate stable at 5.25%, in line with expectations.

In a statement, it was stated that the Monetary Policy Committee concluded that monetary policy should remain restrictive for a long time until the risk of inflation rising above the 2% target subsides, a view it has held since last autumn.

BoE Governor Andrew Bailey, in his assessment of the decision, used the expression, “We are not yet at a point where we can cut interest rates, but things are moving in the right direction.”

The unexpected decision of the Swiss National Bank (SNB) to cut the policy rate by 25 basis points to 1.50% caused increased volatility in the markets. Expectations were that the bank would keep its policy rate stable at 1.75%. Thus, the surprise interest rate cut was the first interest rate cut by the SNB in

source: prepared by Melisa Beğiç

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