While the Consumer Price Index (CPI) in the USA increased by 0.5 percent monthly last month, exceeding the expectations, it continued to show the highest increase in the last 39 years, even though it was in line with the expectations with an annual increase of 7 percent.
During the week, while Fed officials gave verbal guidance on monetary policy, it was priced in the bond markets that the Fed will increase interest rates 4 times this year.
In a statement during the week, Fed Chairman Powell stated that they will use the bank’s tools to support the economy and a strong labor market, as well as to prevent high inflation from becoming permanent. “We are determined to achieve maximum employment and price stability targets,” he said.
Emphasizing that the post-pandemic economy may be different in some respects and that these differences should be taken into account while pursuing goals, Powell stated that monetary policy should adopt a broad and forward-looking perspective by keeping up with the ever-developing economy.
Fed Vice President Candidate Lael Brainard signaled that he is open to a rate hike in March, in the session he attended in the US Senate. Pointing out that several interest rate hikes are foreseen throughout the year, Brainard said that he thinks they will be able to raise interest rates as soon as their asset purchases are completed.
After the verbal guidance of the Fed officials, it is priced in the bond markets that the Fed will increase interest rates by at least 24 basis points in March with a 97 percent probability.
While the US 10-year bond yield reached the highest level of the last two years with 1.81 percent, it closed the week at the level of 1.79 percent.
While the dollar index decreased by 0.6 percent to 95.2, the ounce price of gold increased by 1.1 percent to $ 1,817.
The barrel price of Brent oil carried the upward trend for the fourth week in a row, increasing by 5.6 percent to $ 86.
Analysts pointed out that the company’s financial statements for the fourth quarter of 2021, which began to be announced around the world next week with the intense data agenda, may increase stock-based volatility.
US balance sheets may increase stock market volatility
While the US stock markets followed a sales-heavy course this week with the falconry Fed, the balance sheets to be announced in the US next week were the focus of investors.
According to the balance sheets released during the week, the net profit of JPMorgan Chase, one of the country’s largest banks, in the fourth quarter of last year decreased by 14 percent compared to the same period of the previous year, while the net profit of Citigroup decreased by 26 percent. Wells Fargo’s net profit increased 86 percent in the same period.
On the macroeconomic data side, the US Producer Price Index (PPI) rose by 0.2 percent month-on-month, below market expectations.
The consumer confidence index, measured by the University of Michigan in the USA, decreased to 68.8 with a monthly decrease of 1.8 points in January due to the Omicron variant in the new type of coronavirus (Kovid-19) epidemic and rising inflation concerns.
With these developments, the S&P 500 index lost 0.30 percent on a weekly basis, the Dow Jones index fell 0.88 percent and the Nasdaq index lost 0.28 percent.
The data calendar of the week, which starts with January 17, will follow the New York Fed industrial index on Tuesday, building permits and housing starts on Wednesday, Philadelphia Fed manufacturing index and second-hand home sales data on Thursday. Markets in the US will be closed on Monday for a holiday.
In Europe, eyes will be on ECB officials
While the risk appetite in European stock markets was hurt by the falconry stance of the Fed, the verbal guidance made by the European Central Bank (ECB) officials during the week was the focus of the investors.
ECB President Christine Lagarde noted that they expect the causes of inflation pressure to soften in the second half of 2022 and said that they will do whatever it takes to reduce inflation to 2 percent in the medium term.
ECB Vice President Luis de Guindos said in a statement that energy prices are expected to play an important role in inflation. Expressing that the inflation pressure has increased relatively for the next 12 months, Guindos noted that the risks are balanced in the medium term.
According to the macroeconomic data announced in Europe, industrial production in the UK increased by 1 percent on a monthly basis, leaving the expectations behind, while the foreign trade deficit amounted to 13.9 billion pounds.
The euro closed the week at 1.1404, up 0.4 percent against the dollar.
While the FTSE 100 index gained 0.77 percent in the UK this week, the DAX index in Germany decreased by 0.40 percent weekly, the CAC 40 index in France by 1.06 percent and the MIB 30 index in Italy decreased by 0.3 percent.
In Europe next week, unemployment in the UK and the Zew expectation index in Germany on Tuesday, CPI in the UK on Wednesday, PPI in Germany and CPI in the Eurozone on Thursday, and Consumer Confidence Index in the Eurozone on Friday will be followed.
All eyes on BoJ in Asia
While the Asian stock markets followed a sales-weighted course parallel to the US stock markets, the Hang Seng index diverged positively in Hong Kong. Next week, the eyes turned to the intense data agenda, especially the policy decision of the Bank of Japan (BoJ) on Tuesday.
While the BOJ is not expected to change interest rates, possible changes in the text of the decision after the falconry Fed are in the focus of investors.
The Central Bank of South Korea, on the other hand, increased the policy rate by 25 basis points to 1.25%, while increasing the interest rate for the second consecutive year. In the statement made by the Central Bank of South Korea, it was stated that the policy rate hike could continue, and that the inflation pressure was stronger than previous forecasts.
According to the macroeconomic data announced in Asia, CPI and PPI decreased to 10.3 percent on an annual basis in China.
While China’s foreign trade surplus in December broke a record with 94.5 billion dollars, exports increased by 20.9 percent and imports by 19.5 percent in December compared to the same month of the previous year.
With these developments, the Nikkei 225 index depreciated by 1.24 percent in Japan, the Shanghai composite index in China by 1.63% and the Kospi index in South Korea by 1.1 percent on a weekly basis, while the Hang Seng index in Hong Kong decreased by 3 percent. 79 gained in value.
In the data calendar of the week starting with January 17, Monday’s Gross Domestic Product (GDP), industrial production and retail sales in China, industrial production and capacity utilization in Japan on Tuesday, foreign trade balance in Japan on Thursday, and the BOJ’s December meeting on Friday. records will be followed.
Domestically, eyes turned to the Central Bank
Domestically, the BIST 100 index in Borsa Istanbul carried the upward trend led by transportation and industry shares for the tenth consecutive day, while the monetary policy decisions to be announced by the Central Bank of the Republic of Turkey (CBRT) on Thursday next week placed the focus of investors.
Economists who participated in the expectations survey of AA Finans do not expect the CBRT to change the policy rate.
According to the macroeconomic data released this week, the balance of payments deficit was 2 billion 681 million dollars in November 2021, while the 12-month current account deficit was 14 billion 256 million dollars. Industrial production, on the other hand, increased by 11.4 percent on an annual basis, exceeding the economists’ expectation of 8.38 percent.
According to the CBRT Market Participants Survey, the year-end CPI expectation was 29.75 percent.
In Borsa Istanbul, the BIST 100 index closed the week at 2,072.93 points with an increase of 1.95 percent, while the Dollar/TL decreased by 1.7 percent and closed the week at 13.5348.
Analysts noted that technically, 2,150 and 2,250 points are in the resistance position, and 2,000 and 1,970 points are in the support position in the BIST 100 index.
In the next week, the budget balance on Monday, the housing price index on Tuesday and the Consumer Confidence Index on Friday will be followed.