New Developments and Market Analysis in the Fight Against Inflation

New Developments in the Fight Against Inflation

Progress in combating inflation around the world continues to be one of the most important questions for investors. The weakening labor market and inflation data showing signs of slowing down are positively affecting risk appetite. In this context, according to data released in the US, the Producer Price Index (PPI) in July fell short of expectations, increasing by 0.1% on a monthly basis and 2.2% on an annual basis.

Analysts said that this data indicates that price pressures are easing and that this situation supports possible interest rate cuts by the US Federal Reserve (Fed) by shifting the focus to the slowing labor market. Today, all eyes are on the US Consumer Price Index (CPI) data. It is stated that inflation data can cause fluctuations in asset prices.

Interest Rate Cut Expectations

With these developments, the possibility that the Fed will cut interest rates by 50 basis points next month continues to be strong in pricing in money markets. It is estimated that the bank will cut interest rates by 100 basis points in total by the end of the year. While Fed officials continue to give verbal guidance, Atlanta Fed President Raphael Bostic stated that he wants to see “a little more data” before supporting a rate cut. He also emphasized that the Fed wants to be sure that it will not have to change course after starting to cut interest rates.

Market Situation

In light of these developments, the US 10-year bond yield is balanced at 3.85%, while the dollar index is at 102.6. The ounce price of gold, after falling 0.3% yesterday, fell 0.2% to $2,461 on the new day. The barrel price of Brent oil is trading at $80.8, 0.3% above the previous close. With these developments, the Dow Jones index gained 1.04%, the S&P 500 index gained 1.68% and the Nasdaq index gained 2.43% yesterday. However, index futures contracts in the US started the new day with a decline.

European Markets

European stock markets followed a buying-heavy trend yesterday. The growth data to be released in the Eurozone today is expected to influence the direction of the markets, as will the clues it will give about the regional economy. It is currently considered certain that the European Central Bank (ECB) will reduce the policy rate by 25 basis points at next month’s meeting. However, there are still uncertainties about how much interest rate cuts will be made by the end of the year.

Analysts say that weakening economic activity in Europe could narrow the bank’s policy space. They say that yesterday’s data continues to increase concerns about the region’s economies. According to data released by the German-based European Economic Research Center (ZEW), the ZEW Economic Confidence Index, which measures the expectations of institutional investors and market experts for the future, decreased by 25.8 points, from 43.7 points in July to 17.9 points in August.

UK and Asian Markets

Similarly, Germany’s ZEW Economic Confidence Index fell by 22.6 points from 41.8 points in July to 19.2 points in August. Along with these developments, the FTSE 100 index in the UK rose by 0.30%, the DAX 40 index in Germany rose by 0.48%, the FTSE MIB 30 index in Italy rose by 0.24% and the CAC 40 index in France rose by 0.35% . Index futures contracts in Europe also started the new day with an increase.

On the Asian side, a mixed trend is observed. Japanese Prime Minister Fumiyo Kishida announced that he will not run for party chairman again next month. Kishida’s decision raises questions about how it will affect Japan’s economic management, while also eroding risk appetite in the markets. The dollar/yen parity continues to move in the 147-148 band. Nearing the close, Japan’s Nikkei 225 index rose 0.1% and South Korea’s Kospi index rose 0.7%, while China’s Shanghai composite index fell 0.4% and Hong Kong’s Hang Seng index fell 0.5%.

Turkish Market

Domestically, the BIST 100 index on Borsa Istanbul, which followed a buying-heavy course yesterday, closed the day at 9,920.61 points, up 0.94% compared to the previous close. According to data released in the country, Turkey’s current account had a surplus of $407 million in June, and a surplus of $4 billion 549 million in the current account excluding gold and energy. Thus, Turkey had a current account surplus after 8 months.

Dollar/TL, which closed at 33.5400 yesterday with a 0.1% decrease, is trading horizontally at 33.5500 today at the opening of the interbank market. Analysts say that the domestic data agenda is calm today, and that growth and industrial production in the Eurozone and inflation data in the US will be monitored abroad. It is noted that technically, 10,000 and 10,100 points are resistance in the BIST 100 index, while 9,900 and 9,750 points are support.