While question marks persist in global markets regarding the magnitude of the steps the US Federal Reserve (Fed) will take in the coming period, expectations that the US economy may make a “soft landing” are feeding risk appetite.
Signals about whether economies around the world will enter a recession are being closely monitored.
While signals from the labor market, especially in the US, continue to be the focus of investors, data released yesterday showed that the slowdown in economic activity continues, albeit limited.
The US manufacturing Purchasing Managers Index (PMI) fell 0.9 points monthly to 47 in September, below market expectations. The index recorded its lowest level in 15 months.
The services sector PMI also fell by 0.3 points to 55.4 in the same period, but was above expectations.
While the verbal guidance of Fed officials is also in the focus of the markets, Minneapolis Fed President Neel Kashkari stated in an article he wrote about why he supports the interest rate cut decision taken by the bank last week that he is in favor of reducing interest rates by another half point by the end of the year.
Kashkari noted that inflation has made significant progress toward the 2 percent target and the labor market has softened.
Kashkari, who also gave an interview to a television channel, stated that he expected the bank to take smaller steps in the future.
Atlanta Fed President Raphael Bostic also said that the bank’s big move to start the rate-cutting cycle would help interest rates approach neutral levels as the risks between inflation and employment become more balanced.
Bostic said that the progress in inflation and the cooling in the labor market were much faster than he had anticipated, and that he foresaw the normalization of monetary policy earlier than he thought.
Chicago Fed President Austan Goolsbee said interest rates must be lowered significantly to protect the labor market and support the U.S. economy.
“As we gain confidence that inflation is on track to fall to 2 percent, we need to focus on risks to employment,” Goolsbee said, adding, “This probably means a lot more interest rate cuts next year.”
While the expectation that the Fed will make a 75 basis point cut by the end of the year continues to be strong in money market pricing, it is anticipated that there will be a 25 basis point rate cut in November and a 50 basis point rate cut in December.
On the other hand, the 79th United Nations (UN) General Assembly, which is considered one of the largest diplomatic events in the world and brings together the leaders of member countries, will begin in New York today.
With these developments, the US 10-year bond interest rate is currently at 3.74 percent, while the dollar index is balanced at 100.9.
Continuing its record streak, the ounce price of gold broke its historical high of $2,640 and is currently at $2,635, 0.2 percent above the previous close.
Copper, one of the most widely used products in the manufacturing industry, is finding buyers for a pound of copper at $4.41, up 2.2 percent on the new day, following the limited easing of recession concerns and expectations that demand for copper will remain strong in the coming period. Analysts reported that the steps taken by the government in China today were also effective in copper testing its highest level since July 18.
The barrel price of Brent oil is currently at $74.1, up 0.7 percent, after closing at $73.6 yesterday with a 0.7 percent decrease.
Yesterday, the Dow Jones index rose by 0.15 percent, the S&P 500 index rose by 0.28 percent and the Nasdaq index rose by 0.14 percent. Index futures contracts in the US started the new day with a negative trend.
While a buying-heavy trend dominated European stock markets yesterday, except for Italy, signals that economic activity in the region is slowing down are drawing attention.
While inflation concerns are giving way to recession concerns across the region, uncertainties regarding the steps the European Central Bank (ECB) will take by the end of the year continue.
According to data released yesterday, the manufacturing PMI in Germany fell from 42.4 in August to 40.3 in September, and the service sector PMI fell from 51.2 to 50.6.
In the Eurozone, the manufacturing PMI fell from 45.8 in August to 44.8 in September, and the services PMI, which was 52.9, fell to 50.5, marking its weakest level in the last seven months.
In the UK, September manufacturing PMI fell from 52.5 to 51.5, and services PMI fell from 53.7 to 52.8.
Analysts noted that although the signals from the announced PMI data indicate that economic activity in the manufacturing industry is slowing down, the service sector still remains strong.
Yesterday, the DAX 40 index in Germany rose by 0.68 percent, the CAC 40 index in France rose by 0.10 percent and the FTSE 100 index in England rose by 0.36 percent, while the FTSE MIB index in Italy fell by 0.24 percent. Index futures contracts in Europe started the day with a mixed course.
On the Asian side, risk appetite increased after the steps to support the economy were announced by the People’s Bank of China (PBoC) on the new trading day.
Accordingly, it reduced the required reserve amount that banks must hold as reserves by 50 basis points, while also reducing the seven-day repo rate by 0.2 points to 1.5 percent.
On the real estate side, interest rates on existing housing loans were reduced by an average of 50 basis points.
Analysts stated that the announced measures will have a positive impact on achieving growth targets in the country, and that the update in loan interest rates is expected to support the decrease in housing stock in order to solve the ongoing problems in the real estate sector.
On the other hand, according to data announced in the region today, the manufacturing industry PMI in Japan was below expectations at 49.6, while the service sector PMI remained strong at 53.9.
The dollar/yen parity, which closed yesterday with a 0.2 percent loss of value at 143.56, is currently at 144.0 with a 0.3 percent increase.
However, the Reserve Bank of Australia left its policy rate unchanged at 4.35%, as expected.
By the close of trading, Japan’s Nikkei 225 index had risen 1 percent, South Korea’s Kospi index had risen 0.8 percent, China’s Shanghai composite index had risen 3.4 percent and Hong Kong’s Hang Seng index had risen 3.6 percent.
Following a sales-heavy trend yesterday, the BIST 100 index in Borsa Istanbul closed the day at 9,887.75 points, down 0.13 percent compared to the previous close.
USD/TL, which closed horizontally at 34.1326 yesterday, is being traded at 34.1530 today, up 0.1 percent at the opening of the interbank market.
Analysts stated that the real sector confidence index and capacity utilization rate will be monitored in Turkey today, the Ifo business confidence index in Germany, the housing price index in the USA, the New York Fed consumer confidence index and the Richmond Fed manufacturing industry index will be monitored abroad, and noted that from a technical perspective, 9,840 and 9,730 points are support in the BIST 100 index, while 10,010 and 10,130 are resistance levels.
