Global markets recovered after historically high selling pressure

By Burhan Sansarlioglu

ISTANBUL (AA) - After concerns that economic activity in the US may slow down more sharply than expected led to deepening selling pressure in global markets on Monday, risk appetite increased in the markets on Tuesday.

The effects of concerns that the Fed's decision to cut interest rates in the near future could raise concerns about the course of the economy, causing panic in the markets, were also felt intensely.

The emergency rate cut decision could be interpreted as the Fed losing control over the markets, analysts pointed out, adding that the bank should clarify the steps it will take in the short term.

On the other hand, the Purchasing Managers' Index (PMI) for the service sector in the US provided some relief in July, while the Institute for Supply Management (ISM) service sector (PMI) increased by 2.6 points on a monthly basis to 51.4 in July, in parallel with market expectations.

"It doesn't make sense to maintain a restrictive policy stance if the economy is weakening," said Chicago Fed President Austan Goolsbee, a closely followed Fed officials, in an interview on Tuesday.

"The employment numbers came in weaker than expected, but it doesn't look like a recession yet," he added

Goolsbee refrained from commenting on whether the Fed would go to an emergency meeting and cut interest rates, saying that this is a very big table, so everything is always on the table, such as rate hikes and rate cuts.

With these developments, forecasts for the Fed to cut interest rates by 50 basis points in September have also strengthened.

In the Eurozone, the composite Purchasing Managers' Index (PMI), which was 50.9 in June, fell to 50.2 in July, the lowest level in the last five months.

The service sector PMI in the Eurozone, which was 52.8 in June, fell to 51.9 in July, the lowest level in the last four months.

In Germany, service sector PMI, which was 53.1 in June, fell to 52.5 in July, the lowest level in the last four months.

In the region, the Producer Price Index (PPI) increased by 0.5% on a monthly basis in June, while it decreased by 3.2% annually.

While cryptocurrency markets also recovered, Bitcoin increased by 2.1% to $55,506.

Reflecting the decline in technology stocks yesterday.

Nvidia's shares, one of the companies that attracted attention in the artificial intelligence rally, fell 6.36%.

Apple's shares also dropped 4.82%, while Berkshire Hathaway, where US investor Warren Buffett is the Chief Executive, halved its shares in the company.

Microsoft's shares declined 3.27%, Meta's shares fell 2.54%, Alphabet's shares fell 4.61% and Amazon's shares fell 4.1%, while Tesla's shares fell 4.23%.

While banking stocks also decreased with recession fears, Citigroup's shares fell 3.42%, Wells Fargo's shares fell 2.14%, JPMorgan Chase's shares fell 2.13% and Morgan Stanley's shares fell 3.94%.

US markets saw a slight downbeat on Monday, with the Nasdaq index fell 3.38%, the S&P 500 dropped 3%, and the Dow Jones decreased by 2.60%.

The US 2-year bond yield closed at 3.97% while Brent crude oil prices have stood at $76,9 per barrel. The US 10-year bond yield closed at 3.84%, and gold prices down by 0.3% to $2,403 an ounce.

As for the VIX volatility Index, also known as the fear index, fell to 38.57.

European stock markets continued to follow a mixed trend.

The FTSE 100 index in the UK dropped 2.04%, France's CAC 40 index 1.42%, Germany's DAX 40 index decreased 1.82% and, Italy's MIB 30 index 2.27% on Monday.

In Türkiye, the BIST 100 index in Borsa Istanbul closed at 9,893.41 points, down 5.54% from the previous close. The USD/TRY exchange rate traded at 33.3502 at the opening of the interbank market on Monday.

On the other hand, the Consumer Price Index (CPI) increased by 3.23% and the Domestic Producer Price Index (D-PPI) by 1.94% on a monthly basis in July. Annual inflation realized as 61.78% in consumer prices and 41.37% in domestic producer prices.

In Asian markets, which experienced a historic decline on Monday due to rising recession concerns, some of the losses experienced with the upward trend were compensated on Tuesday.

The investments made in high-yielding assets with Japanese yen borrowing on Monday triggered the selling pressure in the regional markets with the BoJ's interest rate hike and the rapid appreciation of the Japanese yen, analysts said.

Thus, both the yen, which strengthened with the hawkishness of the BoJ, and the concern that the increasing recession concern in the world could negatively affect the performance of exporting Japanese companies played an important role in deepening the selling pressure in Japanese stock markets.

On the other hand, Japan's Finance Ministry, Financial Services Agency and BoJ officials are expected to meet today to discuss the state of the markets.

In addition, the Reserve Bank of Australia left the policy rate unchanged at 4.35 percent.

Near the close, Japan's Nikkei 225 index rose 8.9%, South Korea's Kospi index 4%, while the Hong Kong's Hang Seng composite index fell 0.1% and China's Shanghai index decreased 0.3%.

*Writing by Sahika Malkoc