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What will the Fed and The Central Bank of the Republic of Turkey decide?

While global share markets were up and down last week with banking sector troubles in the United States and Europe, the monetary policy decisions of the US Central Bank (Fed) to be announced next week and the verbal directions of Fed Chairman Jerome Powell have settled into the focus of investors. Domestically, all eyes are on the CBT.

What will the Fed and The Central Bank of the Republic of Turkey decide?

While rising interest rates around the world negatively affected banks in the United States and Europe, the news flow about banks during the week caused difficulties in the share markets.

The process that started with the bankruptcy of Silicon Valley Bank (SVB) and Signature Bank in the USA was exacerbated by the announcement of Saudi National Bank, the largest partner of Swiss-based Credit Suisse bank in Europe, that they would not make a capital increase.

While Credit Suisse's share price decreased by up to 30 percent with the news flow in question, the Swiss Central Bank announced a $54 billion aid package to avert the crisis.

On the other hand, the US Treasury Department, the US Central Bank (Fed) and the US Federal Deposit Insurance Agency (FDIC) announced that First Republic Bank, one of the banks mentioned in the banking crisis, had received deposits of $ 30 billion from 11 major banks.

Although it seems that these developments have calmed the risk perception in the markets for a while, the selling pressure in the share markets gained strength on the last trading day of the week with concerns that the crisis may not be over yet.

While uncertainties regarding monetary policies increased significantly last week, there was also serious volatility in expectations in the money markets.

While it is estimated that there will be a 62 percent probability of a 25 basis point rate increase in the pricing of the Fed's monetary policy decisions to be taken next week, it is predicted that the bank will not increase rates with a 38 percent probability.

Analysts noted that the bank's monetary policy steps, as well as Fed Chairman Jerome Powell's statements, are also very important, and said that hints about monetary policy in the coming period will have an impact on the direction of markets.

While a buying-weighted course is followed in bond markets with these risks, the US 10-year bond interest rate decreased by about 55 basis points to 4.40 percent.

While commodity prices have been mixed with the news flow in question, a barrel of Brent oil lost 12 percent last week and recorded its steepest decrease since April 2020, ending the week at $72.5.

The price of an ounce of gold, which has found support from investors who are looking for a safe haven with an increased risk perception, has increased to $1,988 with a weekly gain of 6.5 percent.

Fed week in the US is met with uncertainties
While the US share markets had a mixed course last week, the Fed's decisions on Wednesday and Powell's statements after the meeting have settled into the focus of investors around the world.

Although the Consumer Price Index (CPI) and Producer Price Index (PPI) data released in the country last week indicated that the downward trend in inflation continues and supported risk appetite, the signal that inflation pressures may remain sticky for some time in the data released later in the week raised concerns.

Accordingly, the CPI in the United States increased by 0.4 percent monthly and 6 percent annually in February, in line with market expectations. The PPI in the country decreased by 0.1 percent on a monthly basis in February, while it increased by 4.6 percent on an annual basis, which was below expectations.

Housing starts in the US increased 9.8 percent to 1 million 450 thousand in February, exceeding expectations, while the number of first-time unemployment claims applicants decreased to 192 thousand in the week ending March 11.

With these developments, last week on the New York stock exchange, the S&P 500 gained 1.43 percent and the Nasdaq index gained 4.41 percent, while the Dow Jones index decreased 0.15 percent.

In the data calendar of the week that started with March 20, second-hand home sales on Tuesday, Chicago national activity index and new home sales on Thursday, durable goods orders and manufacturing industry and services sector Purchasing Managers Index (PMI) data on Friday will be followed.

In Europe, the ECB was not afraid of the markets
While a sell-off trend came to the fore in European stock markets last week, the European Central Bank (ECB) increased its three main policy rates by 50 basis points despite the market turmoil. In Europe, ECB President Christine Lagarde's statements to be made on Tuesday and Wednesday have settled the focus of investors.

In a statement, the bank noted that inflation is expected to remain at very high levels for a very long time, and it was reported that decisions will be made data-oriented due to uncertainties in the markets.

Lagarde, who made statements after the meeting, responded to questions about the banking crisis by saying that they have important tools at their disposal to protect financial stability and that they will not hesitate to use them if necessary.

Lagarde, who stated that price stability and financial stability can be managed with different tools, stated that the bank will closely monitor the flow of macroeconomic data due to uncertainties related to monetary policy.

Analysts said that concerns about the banking sector in Europe remain strong, adding that the news flow that Credit Suisse may be sold is being closely followed.

Last week, the FTSE 100 index in the UK decreased by 1.01 percent, the DAX index in Germany by 1.33 percent, the CAC 40 index in France by 1.43 percent and the MIB 30 index in Italy by 1.64 percent.

Next week, on Monday, German PPI and foreign trade balance in the Eurozone, ZEW expectations index in Germany on Tuesday, consumer confidence index in the Eurozone on Thursday, and manufacturing industry and service sector PMI data across the region on Friday will be followed.

Asia has been a positive divergence this week
While a buying-weighted trend stood out on Asian stock markets last week, pricing in a smaller-than-expected rise in interest rates around the world supported asset prices in the region.

Although the Central Bank of China (PBoC) did not change the interest rates on 1-year loans during the week, it provided liquidity to the market above expectations. While Chinese President Xi Jinping stated that they will support the controlled growth of his country, the announcement that PBoC Chairman Yi Gang will continue in his post was interpreted as continuing the current policies.

On the other hand, retail sales in China have increased by 3.5 percent since the beginning of the year, in line with expectations, while industrial production increased by 2.4 percent, albeit slightly below forecasts. The acceleration of home sales in the country also led to a decrease in concerns about the housing sector.

US President Joe Biden has announced that he plans to meet with Chinese President Xi Jinping.

Analysts said that the visit in question was welcomed in the markets, given the recent tension between the two countries.

In Japan, core machinery orders increased by 9.5 percent y-o-y beating expectations, while industrial production decreased by 3.1 percent year-on-year.

Parallel to the movement in bond rates around the world, Japan's 10-year bond interest rate decreased by about 20 basis points to 0.30 percent last week.

On a weekly basis, the Nikkei 225 index in Japan increased 1.20 percent, the Shanghai composite index in China increased 0.73 percent, the Hang Seng index in Hong Kong increased 1.64 percent and the Kospi index in South Korea increased 0.75 percent.

Friday March 20 will be followed by CPI data in Japan in the data calendar of the week starting from March. In Japan, markets will be closed on Monday due to a holiday.

Domestically, eyes were turned to the CBT
Domestically, the BIST 100 index decreased 4.61 percent last week to close at 5,136.44 points, while next week eyes were turned to Thursday's monetary policy decisions of the Central Bank of the Republic of Turkey (CBRT).

According to the data announced domestically last week, Turkey's current account had a deficit of $9 billion 849 million in January, while a surplus of $2 billion 602 million occurred in the current account excluding gold and energy.

The dollar/TL ended the week at 19.0186, 0.3 percent above the previous weekly close.

The international credit rating agency Fitch Ratings has confirmed Turkey's credit rating as "B" and its rating outlook as "negative".

Analysts said that from a technical point of view, 5,100 and 5,000 levels may stand out as support and 5,200 and 5,340 points may stand out as resistance in the BIST 100 index.

Next week, consumer confidence index data will also be followed by domestic consumer confidence index data on Thursday.

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