It is observed that volatility in the markets has increased and pricing has become more difficult amid the inflation and recession concerns that continue to strengthen around the world.
According to the data released yesterday, while the Consumer Price Index (CPI) in the USA increased by 1.3 percent monthly and 9.1 percent annually, far surpassing expectations, the fear that the Fed may become more hawkish in its tightening policies to control inflation increases the risk perception.
While pricing begins in the money markets that the Fed will take stronger tightening steps in July and September meetings, the possibility of recession continues to strengthen according to the pricing in the bond markets.
Accordingly, it is estimated that the Fed will increase interest rates by 100 basis points at the July meeting and 75 basis points at the September meeting, with an 80 percent probability.
While the inverting yield curve continues to become evident in some assets after the sales-weighted course in the bond markets, the difference between the US 2-year bond yield and the 10-year bond yield has reached 25 basis points, the highest of the last 15 years, showing that recession pricing has strengthened.
The gap between the US 3-month treasury bills and 10-year bonds also fell to the lowest level since February 2020 with 61 basis points.
The yield difference between these two assets is followed very closely by the Fed as a recession indicator. In a study conducted by the New York Fed in 1996, it was announced that the economy was expected to enter a recession within 6 to 18 months if the yield on the 3-month treasury bills exceeded the 10-year bond yield.
On the other hand, Fed officials gave the message that their hawk stance is getting stronger in their statements yesterday.
Atlanta Fed President Raphael Bostic stated that June data showed that inflation did not move positively. Noting that the continuing increase in inflation is a cause for concern, Bostic replied "everything is in the game" when asked about the possibility of a 100 basis point rate hike in July.
Richmond Fed President Thomas Barkin also noted that both headline and core inflation were "extreme". Pointing out that the interest rate hike in June is a very important sign that the Fed will take inflation seriously, Barkin stated that the latest data necessitate continuing to be determined in the fight against inflation. Barkin stated that there is also the risk of recession in the short term, noting that the Fed's priority is to control inflation rather than growth.
In the July issue of the Fed's "Beige Book" report, which includes assessments of the current situation in the American economy, it was reported that signs of slowdown in demand increased in several regions, while concerns about the increased recession risk in 5 regions were noted.
The dollar index, which reached the peak of the last 20 years with 108.6 after the inflation data, is at 108.3 in the new day.
With these developments, the S&P 500 index lost 0.45 percent, the Nasdaq index by 0.15 percent and the Dow Jones index by 0.67 percent in the New York stock market yesterday. Index futures contracts in the USA started the new day with a limited decline.
Equity markets in Europe followed a negative course with the developments in the USA yesterday, while the euro/dollar parity fell below 1 level for the first time since 2002.
The euro/dollar parity, which has been following a sales-heavy course for a while due to the European Central Bank (ECB) being unable to keep up with the Fed's policy steps and increasing energy supply problems, is trading at 1.0020 today after seeing 0.9998 yesterday.
Problems related to natural gas supply in the region continue. Gazprom announced yesterday that they do not have the necessary documents to return a critical Siemens turbine engine, repaired in Canada, to Russia, and therefore they cannot guarantee the gas flow. With the aforementioned statement, natural gas contracts for July futures, which went up to 185 euros, closed the day at 180.5 euros with an increase of 3.1 percent.
Yesterday, with these developments, DAX 30 index decreased by 1.16 percent in Germany, FTSE 100 index decreased by 0.74 percent in England, CAC 40 index decreased by 0.73 percent in France and FTSE MIB 30 index decreased by 0.93 percent in Italy. Index futures contracts in Europe started the new day with an increase.
While the stock markets in Asia follow a buying-heavy course, albeit limited, technology stocks in China lead the aforementioned rise.
Shares of Chinese tech companies are trending higher after US officials announced that the problem with Chinese tech companies' audit reports could be fixed and a deal was possible.
On the other hand, while the increasing number of cases in the new type of coronavirus (Kovid-19) epidemic continues to erode the risk appetite throughout the region, China continues to increase restrictions in some cities.
The dollar/yen parity continues to break records. The dollar/yen parity, whose upward trend gained momentum after the data announced in the USA yesterday, is currently finding buyers at its historical peak of 138.5.
According to the macroeconomic data announced in the country, industrial production also decreased in May, 7.5 percent on a monthly basis and 3.1 on an annual basis. Capacity utilization also decreased by 9.2 percent.
With these developments, Nikkei 225 index gained 0.7 percent in Japan close to the closing, while Shanghai composite index in China and Kospi index in South Korea remained flat. Hong Kong's Hang Seng index fell 0.7 percent.
While the BIST 100 index in Borsa Istanbul, which followed a sales-weighted course in line with the global stock markets yesterday, closed the day at 2,408.08 points with a decrease of 1.07 percent, the eyes were turned to the industrial production data to be announced today.
Economists participating in AA Finans' expectation survey expect the calendar adjusted industrial production index to increase by 8 percent in May compared to the same period of the previous year.
After closing at 17.4293 with an increase of 0.7 percent yesterday, the Dollar/TRY is trading at 17.4580 at the opening of the interbank market today.
Analysts stated that weekly unemployment applications and Producer Price Index (PPI) data will be followed in the USA today, and technically, 2,390 points in the BIST 100 index are in the position of support and the level of 2.440 is in the resistance position.
The data to be followed in the markets today are as follows:
10.00 Turkey, industrial production in May
15.30 the USA weekly jobless claims
15.30 the USA June PPI
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