ISTANBUL
Global markets entered the week with mixed signals as key economic data from major economies, including the US, UK, Germany, and the Eurozone, are set to be published.
Uncertainties regarding the trade and economic policies of the new US administration continue to affect the global economy, with growing concerns about a potential recession.
Signals from major economies indicate that inflation and recession risks are being reflected in market pricing. US employment data, to be released this week, is expected to provide more insight into the state of the economy.
In the US, fears persist that protectionist trade policies under re-elected President Donald Trump could exacerbate inflation, with uncertainties about the impact of these policies remaining a key concern for the Federal Reserve’s (Fed) strategy.
The Fed is expected to reduce interest rates only twice in 2025, and the upcoming release of the Federal Open Market Committee (FOMC) meeting minutes on Wednesday will offer more insight into the Fed's future policies.
Richmond Fed President Tom Barkin, speaking on Friday, noted that the US economy is in a “good place” and that the central bank can afford to be patient with monetary policy.
Barkin also expressed optimism about the US economy’s outlook in 2025, despite uncertainties about the Trump administration's policies. He stated that the upside risks to growth are greater than the downside risks.
Given these developments, it is certain that the Fed will keep the policy rate unchanged in its first decision of the year, scheduled for January 29. However, market pricing suggests that the first rate cut of the year may occur in May.
On the corporate side, US Steel shares dropped by 6.5% after President Joe Biden intervened to block the sale of US Steel to Japan’s largest steel producer, Nippon Steel, citing national security concerns.
Meanwhile, US automakers Ford and General Motors reported their best annual US sales since 2019. Following the announcement of these figures on Friday, Ford’s shares rose by over 2%, and General Motors’ shares increased by nearly 1%.
With these updates, the US 10-year bond yield stabilized at 4.62%, and the price of an ounce of gold started the new week at $2,633, down by 0.2%.
Although the US dollar index opened the week at 108.9, down by 0.1%, it continues to hover near its highest levels since November 2022.
Due to uncertainty over manufacturing activity in China, Brent oil is trading at $76 per barrel, down by 0.6%.
On the New York Stock Exchange, the S&P 500 index rose by 1.26%, the Nasdaq increased by 1.77%, and the Dow Jones gained 0.80%. US index futures started the week with mixed movements.
European stock markets saw a sales-driven decline on Friday, and attention is now focused on the inflation data to be released in Germany on the first trading day of the week.
Recession concerns across Europe remain central, with inflation data for December, particularly from Germany, the region's largest economy, under close scrutiny.
In the money markets, it is widely expected that the European Central Bank (ECB) will cut interest rates by 25 basis points in its first monetary policy decision of the year, scheduled for January 30.
In corporate news, Stellantis shares fell by 3.5% on Friday after the company reported a 45% drop in car production last year.
The FTSE 100 index in Britain fell by 0.44%, France's CAC 40 dropped by 1.51%, Germany's DAX 40 declined by 0.59%, and Italy's FTSE MIB 30 decreased by 0.72%. European index futures began the week with mixed movements.
In Asia, stock markets showed a negative trend, except in South Korea, where the Kospi index gained 1.9%. Attention is focused on bond yields in Japan and China.
China’s 10-year bond yield remained around 1.6%, with economic uncertainties contributing to sustained demand for bonds.
Analysts noted that despite a lack of significant economic recovery in China and continued weak domestic demand, risks in the country could impact the global economy.
Meanwhile, Japan’s 10-year bond yields hovered near the highest level in 14 years at 1.12%, as inflation concerns in Japan intensified. Data from Japan indicates strengthening inflation, which is contributing to selling pressure on bonds.
Bank of Japan (BoJ) Governor Kazuo Ueda commented that the timing of monetary tightening by the BoJ will depend on future economic, financial, and price developments.
Due to uncertainties surrounding the timing and scale of the BoJ's future policy actions, analysts are closely monitoring news regarding the Bank’s stance.
December's service sector PMI for Japan remained strong at 50.9, while China's Caixin service sector PMI for December continued to expand, though it came in below expectations at 52.2.
As a result, Japan's Nikkei 225 index fell by 1.6%, China's Shanghai Composite declined by 0.3%, and Hong Kong's Hang Seng dropped by 0.5%.
Borsa Istanbul followed a buying-heavy course on Friday in Turkey, with the BIST 100 index opening on Monday at 10,075.17 points, showing a 1.14% gain.
As of 10:18 (0718 GMT) on Monday, the USD/TRY exchange rate stands at 35.3700.
*Writing by Mucahithan Avcioglu
