While global markets are mixed with concerns about the economic effects of central banks’ hawkish monetary policies and rising bond yields, volatility is expected to continue before the upcoming Christmas holiday.
With the expectations that the US Federal Reserve (Fed) will continue to increase interest rates throughout the next year, the volatility continued in the stock markets, which have been under selling pressure since last week, due to rising bond yields.
Surprisingly, the Bank of Japan (BoJ) widened the yield curve target band by 25 basis points in both directions and set it as plus/minus 0.50 percent yesterday, which contributed to the increase in bond rates. While this decision of the bank, which allowed the rise in long-term bond rates, was perceived as a step towards abandoning the ultra-loose monetary policy, Japan’s 10-year bond yield rose from 0.26 percent to 0.45 percent with the announcement.
On the macroeconomic data side, data released in the US yesterday showed that high borrowing costs continue to reduce housing demand. Accordingly, housing starts in the USA carried their decline for the third month with 1 million 427 thousand in November. Construction permits also decreased by 11.2 percent in November, to the lowest level in 2.5 years.
On the other hand, the weak course of retail sales, which is expected to increase before the Christmas holiday, negatively affected the shares in the consumption sector, while a fluctuating course was observed in the New York stock market yesterday due to these developments. The Dow Jones index ended its 5-day decline with an increase of 0.28 percent and the S&P 500 index increased by 0.11 percent, while the Nasdaq index remained flat. The US 10-year bond yield hit 3.72%, the highest level since November 30. The dollar index, on the other hand, is flat today, after closing just below 104 with a decrease of 0.7 percent yesterday. US index futures contracts started the new day with buyers.
On the European side, with the agreement of the European Union (EU) member countries to apply a ceiling price to natural gas, natural gas futures contracts traded in the Netherlands continued their decline and were stabilized at 105.6 euros with a decrease of 2.8 percent. On the other hand, while consumer confidence index improved for the third month in a row in the Euro Area, Producer Price Index (PPI) in Germany fell by 3.9 percent in November, more than expected.
While the European bond market also participated in the rise in global bond rates, the 10-year bond yield tested its highest level since November 8 with 2.31 percent in Germany, 2.85 percent in France and 4.50 percent in Italy. .
With these developments, the mixed course of the European stock markets came to the fore yesterday. While the DAX 40 index in Germany and the CAC 40 index in France depreciated by 0.42 percent and 0.35 percent in France, the FTSE 100 index rose by 0.13 percent in the UK. Euro/dollar parity continued its sideways movement above 1.06. Index futures contracts in Europe started the new day with buyers.
On the Asian side, the increase in the number of Kovid-19 cases in China causes concerns about the economy to remain on the agenda. On the Japanese side, it is stated that the bank conducted an off-schedule government bond purchase operation in the face of the rapid rise in bond rates after the BOJ’s decision yesterday. In the region where the data agenda is weak, it is seen that the risk appetite in the stock markets continues to be low, while the Shanghai composite index in China is 0.3 percent, the Nikkei 225 index in Japan is 0.7 percent and the Kospi index in South Korea is 0.2 percent. Hong Kong’s Hang Seng index rose 0.2 percent.
Domestically, the BIST 100 index continued its upward trend yesterday and reached its historical peak with 5,445.92 points, and increased its closing record by 0.50 percent to 5,419.02 points. After closing at 18.6569 with a limited increase of 0.04 percent yesterday, the Dollar/TL is traded at 18.6550 at the opening of the interbank market today.
Analysts stated that the recession concerns, strengthened by the tightening steps of the central banks, continue to put pressure on the global stock markets, and said that the volatility may continue due to the increasing bond yields and investor transactions that want to close their positions before the Christmas holidays.
Stating that the positive divergence of domestic markets continues, analysts noted that although the upward trend is expected to continue, it is necessary to be cautious in the face of the possibility of increasing profit realization.
Analysts stated that the current account balance, consumer confidence index and second-hand house sales in the USA came to the fore in today’s data agenda, and reported that, technically, 5.430 and 5.500 levels in the BIST 100 index are in the position of resistance and 5.350 points are in the support position.
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