All eyes on Fed Chair Powell in global markets

While all eyes in global markets turn to the statements to be made today by US Federal Reserve (Fed) Chair Jerome Powell, the ongoing conflicts in the Middle East and US bond yields hitting a 16-year high are pressuring equity markets.

Data released in the country yesterday showed that housing construction recovered in September. Accordingly, US housing starts, which fell to a 3-year low in August, increased by 7 percent in September, while building permits fell less than expected in the same period.

Following the data indicating that the economy maintains its strength, expectations that the Fed will keep interest rates higher for longer strengthened, while bond yields began to rise. The US 10-year bond yield rose above 4.9 percent for the first time since 2007.

Along with these developments, Fed Board of Governors Member Christopher Waller stated that it is still too early to say whether further interest rate hikes will be needed.

Waller noted he believes they can wait and see how the economy develops before making definitive moves on the course of the policy rate. Noting that he will look carefully at the data, Waller signaled that he is in favor of keeping interest rates steady at the next meeting.

Christopher Waller stated, "If the real side of the economy softens, we will have more room to wait for further interest rate hikes and allow the recent rise in long-term interest rates to do some of our work. However, if the real economy continues to show its underlying strength and inflation stabilizes or reaccelerates, more policy tightening is likely to be needed despite the recent increase in long-term interest rates."

New York Fed President John Williams, on the other hand, noted that interest rates will need to remain at restrictive levels for "a while" to bring inflation back to the bank's 2 percent target.

In the Fed's "Beige Book" report, it was reported that there has been "very little" change in economic activity since September, tightness in the labor market continued to ease across the country, and prices generally continued to increase at a modest pace.

Analysts noted that despite the steps taken by the Fed, the desired slowdown in economic activity could not be achieved and the inflation threat continues to be a source of concern, adding that this situation increased the selling pressure in bond markets and pushed yields to a 16-year high. They stated that the signals to be taken from Fed Chair Powell's statements regarding the economic outlook at the Economic Club of New York today are expected to be effective on the direction of the markets.

Stating that the Fed is not expected to make a change in the policy rate next month in the current pricing in money markets, analysts reported that, however, uncertainties regarding the next two meetings could become clear with Powell's statements today.

While stock-based volatility increases during the ongoing earnings season in the country, shares of Morgan Stanley, one of the country's major banks, lost nearly 7 percent in value after the bank announced that its net profit decreased by 9 percent in the third quarter of this year compared to the same period of 2022.

The profit of US electric car manufacturer Tesla fell by 44 percent in the third quarter compared to the same period last year, due to the impact of the price cuts it made on cars worldwide.

In commodity prices, volatility based on news flow continues to be effective.

The strong perception that the desired efficiency could not be achieved during US President Joe Biden's visit to the Middle East caused expectations for a halt to the conflicts to weaken, while the ongoing risk perception continues to support the demand for gold.

After testing its highest level since August 1 at 1,962 dollars yesterday, the ounce price of gold completed the day with a 1.3 percent increase at 1,948 dollars, while it is trading flat in the new day.

While the barrel price of Brent crude oil continues to find buyers above 90 dollars, the US administration suspended some sanctions it applied to the country's oil, natural gas, and gold sectors after the government in Venezuela reached an agreement with the opposition to hold elections in 2024.

With these developments, the Dow Jones index lost 0.98 percent, the S&P 500 index lost 1.34 percent, and the Nasdaq index lost 1.62 percent on the New York stock exchange yesterday. Index futures contracts in the US also started the new day with a sales-heavy trend.

While a sales-heavy trend stood out in European stock markets yesterday, developments in the Middle East and macroeconomic data are being closely followed.

Although the European Central Bank (ECB) is not expected to raise interest rates in the coming period, the announced macroeconomic data and rising commodity prices continue to affect pricing in money markets.

In Germany, the DAX 40 index lost 1.03 percent, in France the CAC 40 index lost 0.91 percent, in the UK the FTSE 100 index lost 1.14 percent, and in Italy the MIB 30 index lost 0.82 percent. Index futures contracts in Europe also started the new day with a decline.

Asian equity markets are also following a negative trend in the new day with the effect of the selling pressure in US bond markets.

While the troubles of the real estate sector in China continue to affect the markets, the news flow regarding Country Garden, the country's biggest player in this field, continues to be in the focus of investors.

The Bank of Korea kept its policy rate unchanged at 3.5 percent for the 6th consecutive meeting.

According to macroeconomic data released in Japan, the country's foreign trade balance posted a surplus of 62 billion yen, contrary to expectations.

Near the close, the Nikkei 225 index in Japan fell by 1.8 percent, the Kospi index in South Korea by 1.9 percent, the Shanghai composite index in China by 1.4 percent, and the Hang Seng index in Hong Kong by 2 percent.

Domestically, the BIST 100 index in Borsa Istanbul, which followed a sales-heavy trend yesterday, completed the day at 7,842.66 points with a loss of 3.36 percent in value.

After completing the day at 28.0028 with a 0.2 percent increase yesterday, the US Dollar/TRY is trading at the 28.0200 level at the opening of the interbank market today.

Analysts stated that today, weekly money and bank statistics domestically, and Fed Chair Powell's speech as well as US jobless claims, the Philadelphia Fed manufacturing index, housing starts, and existing home sales, along with the news flow regarding the Israeli-Palestinian conflict will be followed abroad, noting that technically, the 7,840 and 7,750 levels are in a support position and 8,000 points are in a resistance position in the BIST 100 index.