Global markets mixed as US economic indicators fuel speculation on Fed’s inflation target

By Mahmut Cil

ISTANBUL (AA) - Global markets closed with mixed signals Friday as fresh data from major economies indicated resilient activity despite ongoing inflation concerns. Analysts say US labor and manufacturing data suggest the Federal Reserve may achieve its 2% inflation goal later than anticipated, likely influencing the central bank’s rate-cut strategy.

In the US, new unemployment claims dropped last week to 227,000, below market expectations, underscoring a resilient labor market. Analysts suggest this bolstered expectations that the Fed may hold off on aggressive rate cuts in upcoming meetings. Manufacturing activity also showed a slight improvement, with the Purchasing Managers’ Index (PMI) for October rising to 47.8, while the services PMI ticked up to 55.3.

Meanwhile, new home sales surged by 4.1% to 738,000 in September, the highest since May 2023, adding to optimism about the economy's underlying strength.

Despite cooling inflation, Fed officials caution that the goal remains unmet. Projections in the money markets indicate a likely 25 basis point rate cut next month, with a 72% chance for an additional December cut. The US 10-year bond yield was at 4.20% on Friday morning, and the dollar index slid to 104.1 after a 0.4% drop.

In corporate news, electric vehicle manufacturer Tesla reported notable gains in production and sales, forecasting up to a 30% increase in sales for next year. Tesla shares soared nearly 22%, marking the largest gain since 2013. On the other hand, IBM’s quarterly revenue missed expectations, declining over 6%, and Boeing continued to face challenges with employees rejecting a proposed pay raise, sending Boeing shares down by 1.2%.

Political uncertainties also weighed on US markets as polls show close results between former President Donald Trump and Vice President Kamala Harris.

The Dow Jones fell by 0.33% on Thursday, while the S&P 500 and Nasdaq gained 0.21% and 0.76%, respectively. Friday morning futures pointed to a downward trend.

In Europe, while major markets opened positively, recession concerns resurfaced amid mixed macroeconomic indicators. The eurozone’s services PMI fell to an eight-month low of 51.2 from 51.4 in September, with composite and manufacturing PMIs at 49.7 and 45.9. Germany’s manufacturing PMI increased slightly to 42.6 from 40.6 in September, while France’s Renault reported a strong third-quarter, boosting its shares by 4.7%. The British bank Barclays’ balance sheet came in above expectations and its shares climbed more than 4%.

Money markets estimate a likely 25 basis point rate cut from the European Central Bank (ECB) in December, with a 50 basis point reduction also under consideration.

The DAX 40 rose by 0.34%, the CAC 40 by 0.08%, and the FTSE 100 by 0.13%, while the FTSE MIB 30 stayed flat. European futures started Friday on a mixed course.

In Asia, markets saw a positive trend, with Japan’s Nikkei 225 falling by 1% ahead of weekend elections. New Prime Minister Shigeru Ishiba dissolved parliament, calling for early elections on Oct. 27, while Japan’s October CPI met expectations with a 1.8% increase.

China’s central bank kept its one-year lending rate steady at 2%, supporting a stable policy stance. The Kospi index rose by 0.1%, the Shanghai Composite by 1%, and Hong Kong’s Hang Seng by 1.3%.

In Türkiye, the BIST 100 rose 1.81% on Thursday, closing at 8,872.85, while the US dollar to Turkish lira rate dipped to 34.2565 and continued trading around 34.2900 on Friday.

*Writing by Emir Yildirim