Global Markets Focus on BoE Interest Rate Decision

Global markets have turned their attention to the interest rate decision of the Bank of England (BoE) to be announced next week.

In global markets, expectations that the Federal Reserve (Fed) could make its first interest rate cut in September have led to a predominantly bullish trend this week, except for European stock markets, with focus shifting to the interest rate decision the Bank of England (BoE) will announce next week.

The focal point in global markets this week has been the Fed’s interest rate decision and the verbal guidance from Fed Chairman Jerome Powell.

The Fed kept its policy rate unchanged at the highest level in 23 years, at a range of 5.25-5.50 percent. The statement from the bank noted that progress towards the 2 percent inflation target has not been achieved in recent months.

Following the interest rate decision, Fed Chairman Jerome Powell also signaled during a press conference that interest rates could remain high for longer than expected.

Powell pointed out that data so far this year has not been very reassuring, stating, “As I’ve said before, data on inflation has come in above expectations. It’s likely to take longer than expected to gain such a high level of confidence.”

Powell emphasized that the focus of policy is on how long monetary policy will remain restrictive, stating, “I don’t think the next policy move will be a rate hike.”

While signals from the policy statement and Fed Chairman Jerome Powell’s remarks have made pricing difficult in global markets, expectations of imminent interest rate cuts have increased due to data indicating a slowdown in job growth in the United States.

In the markets, the probability of the bank cutting interest rates in September increased from 63 percent to 68 percent.

In light of these developments, the yield on the US 10-year Treasury bond fell by about 17 basis points to 4.5030 percent. The dollar index decreased by 1 percent to 105.03.

The price of gold per ounce ended the week with a 1.5 percent decrease at $2,302.25.

With tensions easing in the Middle East, the price of Brent crude oil per barrel fell by 6.1 percent to $82.7.

Positive Trend in New York Stock Exchange In the New York Stock Exchange, positive trends were observed due to concerns about the Federal Reserve keeping interest rates high for longer and better-than-expected company profits during the intense earnings season in the United States.

According to macroeconomic data released in the United States, non-farm payrolls increased by 175,000 in April, falling below expectations, while the unemployment rate rose from 3.8 percent to 3.9 percent.

Average hourly earnings, closely monitored by the Fed, also increased by 0.2 percent, below expectations.

The employment report revealed some cooling in the tight labor market.

The number of initial jobless claims in the United States remained unchanged at 208,000 for the week ending April 27, below expectations.

Non-farm labor productivity in the country increased by 0.3 percent in the first quarter of this year, below expectations, while unit labor costs, one of the inflation indicators followed by the Fed, rose by 4.7 percent during the same period, exceeding forecasts.

Meanwhile, the intense earnings season continues in the United States. US e-commerce giant Amazon reported that its revenue for the first quarter increased by 13 percent compared to the same period last year, reaching $143.3 billion. The company’s shares gained more than 3.5 percent this week.

Revenue for Starbucks, which faced protests and boycott campaigns due to Israeli attacks on Gaza, decreased in the January-March period. The coffee chain, which announced financial results below expectations, lost more than 17 percent of its shares this week. Shares of chip company AMD fell by more than 4 percent.

Despite a 4 percent annual decrease in revenue, Apple’s revenue exceeded market expectations at $90.8 billion. The company announced a $110 billion share buyback. Apple’s share price ended the week with an increase of more than 8 percent, while Qualcomm’s shares gained more than 8 percent following better-than-expected financial results.

The US Treasury Department announced that it has raised its borrowing estimate for the second quarter of this year to $243 billion. The statement noted that the cash balance at the end of June is expected to be $750 billion, and the borrowing estimate is $41 billion higher than the estimate announced in January.

Meanwhile, Tesla reported that after Chinese officials lifted restrictions on their cars once they met the country’s data security requirements, Tesla shares gained more than 7 percent amid expectations that the company would soon introduce autonomous driving technology in China, its second-largest market.

Shares of Philips, a Netherlands-based electronics company, also rose by more than 27 percent after the company reached a $1.1 billion settlement related to injury claims associated with some of its sleep apnea devices.

Furthermore, the shares of Trump Media & Technology Group, the media company of former US President Donald Trump, gained more than 15 percent.

With these developments, the Nasdaq index rose by 1.55 percent, the S&P 500 index by 0.57 percent, and the Dow Jones index by 1.14 percent in the New York Stock Exchange.

Record Close for the Stock Exchange In domestic markets, the BIST 100 index on the Borsa Istanbul completed the week with a 3.64 percent increase at 10,276.88 points, achieving the highest daily and weekly closing in history, reaching a record level of 10,286.57 points.

The USD/TRY ended the week at 32.33372, 0.44 percent below the previous closing.

Meanwhile, as part of the IDB Annual Meetings held in Riyadh for the 50th anniversary of the Islamic Development Bank (IDB), a “Governors’ Dialogue-Turkey” session was held.

Speaking at the meeting, Treasury and Finance Minister Mehmet Şimşek stated that Turkey has a much better story than most developing countries, saying, “Turkey’s public debt stock-to-GDP ratio is less than half of the developing market average.”

Meanwhile, international credit rating agency Standard & Poor’s (S&P) raised Turkey’s credit rating from “B” to “B+” while maintaining the credit rating outlook as “positive.”

Next week, the real effective exchange rate on Monday, treasury cash balance on Wednesday, and unemployment rate and industrial production on Friday will be monitored.

Analysts noted that technically, the resistance levels for the BIST 100 index are at 10,300 and 10,400, while the support levels are at 10,200 and 10,100 points.

source: prepared by Melisa Beğiç

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button