The Fed is expected to accelerate the normalization process in the expansionary monetary policies, which was put into effect in March 2020 after the new type of coronavirus (Kovid-19) epidemic, with today's interest rate hike. While it is almost certain that the bank will increase interest rates by 25 basis points, clues will be sought in the text of the decision on how the pace and extent of the normalization process will follow in the coming period.
Investors will also follow the messages on the roadmap to be followed regarding the termination of asset purchases and balance sheet reduction. In this context, the statements of Fed Chairman Jerome Powell after the interest rate decision will be decisive in the course of the markets.
The Fed last hiked interest rates in November 2018 to end the expansionary monetary policies it had put into effect after the global financial crisis. While it is expected that the bank will increase interest rates by 25 basis points 7 times this year in the markets, possible verbal guidance regarding the bank's response to the economic effects of the Russia-Ukraine war is expected to reshape these expectations.
The developments regarding the Russia-Ukraine war also continue to be decisive on the direction of the markets. While the hopes for the negotiations between the two countries have decreased recently, Russian President Vladimir Putin's statement that Ukraine does not show a serious attitude towards finding mutually acceptable solutions, it is observed that the volatility on the commodity side continues due to the persistence of uncertainties.
While the barrel price of Brent oil fell to the lowest level in 3 weeks with $ 95.8 yesterday, with the expectations that the increasing number of Kovid-19 cases in China will reduce demand, it again tested $ 100 today with the ongoing uncertainties about the war and the news of sanctions. While the increase in the outflows from the bond market before the Fed decisions is also noteworthy, the US 10-year bond yield is flat at 2.15% today, after seeing its highest level since June 2019 with 2.17 percent yesterday. In the bond market, it will be closely watched today whether Russia will make its due payment of 117 million dollars.
With these developments, a positive trend was observed in the New York stock market yesterday, while the US Producer Price Index (PPI) was below expectations in February, which supported the stock markets. The Dow Jones index gained 1.82 percent, the S&P 500 index gained 2.14 percent and the Nasdaq index gained 2.92 percent. After closing at 98.9 with a decrease of 0.2 percent yesterday, the dollar index remains flat today. On the index futures side of the USA, an undecided course is observed before the Fed decisions.
Continuing uncertainties regarding the Russia-Ukraine war in Europe, the course of commodity prices and inflation concerns continue to be priced in as the main risk factor in the stock markets. After the UK's expansion of sanctions against Russia and Putin's statements that dampened hopes for the course of the negotiations, a selling trend was observed in the stock markets yesterday. The FTSE 100 index fell by 0.25%. While the euro/dollar parity, which tested above 1.10 yesterday, was stabilized at 1.0960 levels today, it is seen that the new day started with a mixed course in European index futures contracts.
On the Asian side, after a 3-day sharp decline, a positive trend is observed in the stock markets, especially with the reaction buying concentrated in technology stocks. According to the data released in Japan, exports increased by 19.1 percent and imports by 34 percent on an annual basis in February, while the foreign trade balance posted a deficit of 668.3 billion yen, above expectations. With these developments, Shanghai composite index increased by 2.9 percent in China, Nikkei 225 index increased by 1.9 percent in Japan, Hang Seng index increased by 8 percent in Hong Kong and Kospi index increased by 1.3 percent in South Korea.
Domestically, the BIST 100 index, which started the day with light sellers on Borsa Istanbul, closed the day at 2,079.38 points with a 0.44 percent depreciation. Dollar/TL is traded at 14,7110 at the opening of the interbank market today, after closing at 14,7022 with a 0.5 percent decrease yesterday.
Analysts stated that the decisions of the Fed Open Market Committee (FOMC) to be announced tonight and the evaluations of Fed Chairman Powell will have an impact on the direction of the markets, and said that volatility in the markets may continue today before the decisions.
Analysts said that the news flow regarding the negotiations that will continue today within the scope of the Russia-Ukraine war will be followed closely, and that the domestic housing price index and retail sales in the USA are prominent in the data agenda.
Analysts stated that, technically, 1.950 points in the BIST 100 index are in the support position, and 2.090 and 2.130 levels are in the resistance position.
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