Thanksgiving limited volatility in asset prices

In global equity markets, the continued loss of momentum in inflation concerns in the US and expectations that the US Federal Reserve (Fed) could achieve a soft landing in the economy continued to affect asset prices. On the other hand, the minutes of the US Federal Reserve (Fed) meeting held on October 31-November 1 revealed that bank officials agreed on adopting a cautious approach in the course of monetary policy, and that monetary policy could be tightened further if incoming data shows that progress in reducing inflation is insufficient.

The minutes stated that all officials held the view that it would be appropriate for monetary policy to remain restrictive until inflation sustainably declines to the set target. The expectation that the Fed has reached the end of its hawkish policies continued to be the main factor in pricing last week. However, while macroeconomic data released in the US showed that it is beneficial for investors to be cautious, pricing in money markets regarding the Fed starting interest rate cuts in June remains strong.

As Fed officials continue their verbal guidance, Richmond Fed President Thomas Barkin reported that the data indicates the economy is growing while the pace of price increases is slowing, but that this progress is not enough for the Fed to declare victory against inflation. Reiterating that the focus is on reducing inflation to the target level, Barkin stated that he sees inflation as "stubborn."

THANKSGIVING LIMITED VOLATILITY IN ASSET PRICES

Due to Thanksgiving, volatility in asset prices remained limited worldwide. Nevertheless, the extent of demand in the shopping season, which will start with Black Friday in the US this week, is being closely followed by investors. On the other hand, developments between Israel and Hamas in the Middle East were also a main factor in the markets last week. While the news flow from the Middle East continued to positively affect asset prices, a humanitarian pause, which will stop attacks on Gaza for 4 days and allow for prisoner exchanges and humanitarian aid, has begun with the agreement between Hamas and Israel.

While bond issuances increased volatility in bond yields, the US 10-year bond yield balanced at 4.47 percent, increasing by 4 basis points on a weekly basis after seeing its lowest level since September 22 at 4.36 percent. On the commodities side, while uncertainties regarding whether the agreement between Hamas and Israel will be extended are expected to be effective especially on oil prices, the decrease in volatility in the barrel price of Brent oil due to the holiday effect is noteworthy.

Brent oil completed the week with a 0.6 percent increase at 80.9 dollars. The American Petroleum Institute's announcement that crude oil stocks in the country increased by 9 million 47 thousand barrels, well above the expectations of 1 million 467 thousand barrels, supported forecasts that demand has declined. Analysts stated that despite Brent oil completing the week with an increase, demand concerns continue.

The ounce of gold completed the week with a 1.3 percent increase at 2,003.64 dollars. The dollar index completed the week with a 0.4 percent decrease at 103.4, after testing its lowest level since August 31 at 103.2 yesterday.

BUYING-WEIGHTED COURSE IN NEW YORK STOCK EXCHANGE

In the New York stock market, an upward trend prevailed last week with expectations that the Fed has reached the end of its hawkish steps. On the macroeconomic data side, existing home sales in the US decreased by 4.1 percent in October, falling to the lowest level since August 2010.

Durable goods orders in the US fell by 5.4 percent on a monthly basis in October, more than market expectations. The number of people filing for unemployment benefits for the first time in the country also decreased by 24 thousand people compared to the previous week in the week ending November 18, falling to 209 thousand and remaining below market expectations. The consumer confidence index measured by the University of Michigan was revised upwards to 61.3 in November, while consumers' short-term inflation expectation increased from 4.2 percent to 4.5 percent in November, reaching the highest level since April. Long-term inflation expectations rose from 3 percent to 3.2 percent.

The Manufacturing Purchasing Managers' Index (PMI) in the US fell by 0.6 points monthly to 49.4 in November, remaining below market expectations. The index, which fell to its lowest level in 3 months during this period, pointed to a contraction in the manufacturing sector. The service sector PMI in the country rose to 50.8 in November, an increase of 0.2 points compared to the previous month. The index, which reached its highest level in four months, exceeded market expectations.

California-based chip manufacturer Nvidia surpassed market expectations with 18.12 billion dollars in revenue obtained in the 3-month period ending October 29. Retail chain Best Buy, which sells electronic goods, also estimated that sales would decrease between 6 percent and 7.5 percent this year. While volumes were lower in the markets due to employees combining the Thanksgiving holiday with the weekend in the US, half-day trading was conducted on the New York Stock Exchange on Friday.

With these developments, the Nasdaq index completed the week with a 0.79 percent increase, the S&P 500 index with a 0.95 percent increase, and the Dow Jones index with a 1.27 percent increase on the New York Stock Exchange last week. In the week starting November 27, new home sales on Monday, Dallas Fed Manufacturing Activity Index, consumer confidence index on Tuesday, Richmond Fed Industrial Index, growth and wholesale inventories on Wednesday, personal income and expenditures, weekly unemployment benefits applications, pending home sales on Thursday, and manufacturing PMI on Friday will be followed.

EUROPEAN STOCK MARKETS FOLLOWED A MIXED COURSE

In European stock markets, while a mixed course stood out last week, developments in China, one of Europe's largest trading partners, continued to negatively affect asset prices. On the other hand, the strengthening of expectations that the European Central Bank (ECB) will keep policy rates at these levels for a long time continued to fuel concerns about slowing economic activity in the region.

The minutes of the ECB's October monetary policy meeting revealed that members of the ECB Governing Council are more concerned about economic growth. The minutes, which include the evaluations of the Council members, showed that members insisted that further interest rate hikes should be kept on the table, even if further tightening is not the main scenario.

As ECB members continue their verbal guidance on monetary policy, ECB member Joachim Nagel stated that the ECB's policy rates are very close to their peak point. ECB member Francois Villeroy de Galhau reported that the bank could keep policy rates at these levels for several quarters and could start disposing of assets acquired during the new type of coronavirus (Covid-19) pandemic earlier than expected.

On the other hand, manufacturing and service sector PMI data released in the region showed that although economic activity continues to slow down across the region, the speed of the slowdown is decreasing. In the Eurozone, the service sector PMI was 48.2, the manufacturing PMI was 43.8, and the composite PMI was 47.1, all remaining below the 50 level.

Germany has temporarily frozen all additional spending commitments of all ministries. Meanwhile, according to the German business survey for November by the Ifo Institute for Economic Research, one of Germany's economic and think-tank organizations, 6.8 percent of companies in the country see their assets under threat due to the weakness in the economy. The German economy shrank by 0.1 percent in the 3rd quarter of the year compared to the previous quarter, and by 0.4 percent compared to the same quarter of the previous year.

On the other hand, although the UK was one of the first banks to start fighting inflation, there are concerns that the bank may need to keep policy rates at high levels for longer than other major central banks. With these developments, the DAX index in Germany gained 0.67 percent and the CAC 40 index in France gained 0.85 percent last week, while the MIB 30 index in Italy lost 0.74 percent and the FTSE 100 index in the UK lost 0.15 percent.

Next week, the consumer confidence index and economic confidence index in the Eurozone on Wednesday, the Consumer Price Index (CPI) in Germany, the CPI and unemployment rate in the Eurozone on Thursday, the unemployment rate in Germany, and the manufacturing PMI in the Eurozone, Germany, and the UK on Friday will be announced.

ASIAN STOCK MARKETS WERE POSITIVE EXCEPT FOR CHINA

While a buying-weighted course was followed in Asian stock markets except for China, the "white list" announced regarding the real estate sector in China caused share-based volatility to increase.

Analysts noted that the Chinese government taking steps towards solving the issue was welcomed in the markets.

On the other hand, while the Central Bank of China (PBoC) continues to announce the parity in a way that supports the yuan, the dollar/yuan parity tested its lowest level since June 2 at 7.0627. Steps taken by the government in China showing that it could support distressed companies, especially in the real estate sector, did not help reduce risk perception. On the other hand, inflation data released in Japan revealed the possibility that the Bank of Japan (BoJ) might postpone its normalization calendar a little further, while the Consumer Price Index (CPI) in the country increased by 3.3 percent annually, remaining below expectations.

With these developments, on a weekly basis, the Shanghai composite index in China lost 0.44 percent, while the Kospi index in South Korea gained 1.08 percent, the Hang Seng index in Hong Kong gained 0.60 percent, and the Nikkei 225 index in Japan gained 0.12 percent. Next week, retail sales and industrial production in Japan on Thursday, manufacturing and service sector PMI in China, and the unemployment rate in Japan on Friday will be followed.

EYES WILL BE ON GROWTH DATA DOMESTICALLY

Domestically, the BIST 100 index on Borsa Istanbul gained 1.36 percent last week and completed at 7,959.95 points. The Dollar/TL completed the week at 28.8663, 0.62 percent above the previous close. Turkey's 5-year credit risk premium (CDS) tested its lowest level in approximately the last 3 years at 336 basis points. Meanwhile, the Central Bank of the Republic of Turkey (TCMB) increased the policy rate by 500 basis points to 40 percent last week.

In the statement made by the TCMB, it was noted that the Board assessed that the level of monetary tightness required for the establishment of disinflation has been significantly approached, and that the pace of monetary tightening will be slowed down and tightening steps will be completed in a short period of time. On the other hand, in other announcements made by the TCMB, it was stated that there will be no change in maximum credit card interest rates and member business commission rates until the end of the year, and an upper limit has been introduced to the total interest cost in rediscount credits for exports and foreign exchange-earning services.

The total reserves of the TCMB increased by 5 billion 854 million dollars in the week of November 17 compared to the previous week, reaching 134 billion 468 million dollars, the highest level in the last 9 years. Next week, the economic confidence index and foreign trade balance on Wednesday, growth on Thursday, and manufacturing PMI on Friday will be followed.

Economists participating in the AA Finance expectation survey predict that the Gross Domestic Product (GDP) increased by 5.19 percent annually in the 3rd quarter of 2023. The average of economists' growth expectations for the end of 2023 was 4.31 percent.