Global markets remain mixed following Fed Powell’s statements

By Muhammed Said Tanil

ISTANBUL (AA) – Global markets remained mixed following US macroeconomic data pointing to strong activity, and Fed Chairman Jerome Powell’s statements indicating a “wait-and-see” approach displayed by the bank.

ADP Nonfarm Employment Change for March came in at 184,000 on Wednesday, which was higher than expected, signaling that the tight stance in the labor market continues.

The Institute of Supply Management (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI) was down 1.2 points month-on-month to 51.4 in March, falling short of market expectations, while the S&P Global services PMI decreased 0.6 points to 51.7.

Despite the decline in the data, the service sector continues to expand.

Fed Chairman Jerome Powell delivered his remarks on the economic outlook at the Stanford Business, Government and Society forum on Wednesday.

Powell said it would be inappropriate to lower the policy rate until the target of 2% inflation is sustained.

“Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy,” he said.

“If the economy evolves broadly as we expect, most FOMC participants see it as likely to be appropriate to begin lowering the policy rate at some point this year,” he added.

Other Fed officials, including Atlanta Fed President Raphael Bostic, expect a rate cut this year in the fourth quarter.

Bostic said he does not believe the 2% target inflation can be met by 2026 as the road will be bumpy, and that inflation has not changed significantly in the last few months compared to last year.

Equity markets followed a mixed course following the data and statements from Fed officials, while the US employment data to be released by the Bureau of Labor Statistics on Friday may have an impact on the direction of the markets, analysts say.

In light of these developments, the expectation that the Fed may begin cutting interest rates in June has reached a 64% probability, while the US 10-Year Bond fell from 4.43% to 4.35%.

The US Dollar Index has continued its downward trend for the third trading day in a row, currently standing at 104.2.

The effect of Powell’s support for potential interest rate cuts in 2024 gave way to the increase in gold, as the ounce price of gold tested above $2,300 on Wednesday, extending its upward trend for the seventh day in a row.

The ounce price of gold was trading at $2,292.45 at 11:03 a.m. (0803GMT).

Geopolitical tensions and supply disruptions continue to drive up oil prices, with Brent crude oil trading at $89.3 per barrel for the sixth consecutive trading day.

In the New York Stock Exchange, the Nasdaq index gained 0.23% and the S&P 500 0.11%, while the Dow Jones index by 0.11%.

European stock markets saw a positive trend on Wednesday, and all eyes turned to the services and composite PMI data to be announced across the region on Thursday.

The minutes of the last meeting of the European Central Bank (ECB) will be published on Thursday, and the next steps of the bank in the coming period will be analyzed, analysts say.

The Consumer Price Index (CPI) rose 2.4% year-on-year in March, below expectations, and 0.8% month-on-month, according to preliminary inflation data released on Wednesday in the eurozone.

Although the data strengthened the expectation that the ECB could begin interest rate cuts soon, the euro/US dollar exchange rate carried its upward trend to the third consecutive trading day with the decline in the US Dollar Index, it is currently trading at 1.0850, up 0.1% compared to its previous close.

The FTSE 100 index in the UK soared 0.03%, the MIB 30 index in Italy 0.45%, the DAX 40 index in Germany 0.46%, and the CAC 40 index in France 0.29% on Wednesday.

European index futures contracts started Thursday on a mixed course.

As for Asian equity markets, a buying-weighted course was seen, and there were no transactions in China and Hong Kong markets due to the Ching Ming Festival.

Following the earthquake disaster in Taiwan on Wednesday, the Taiwan Semiconductor Manufacturing Co (TSMC), the world’s largest chipmaker, stopped production in some of its factories.

After the production cuts, the upward acceleration in equity markets led by the shares of Samsung Electronics and SK Hynix were in the limelight, with increasing expectations that chip prices could rise.

The Nikkei 225 index in Japan gained 1.3% and the Kospi index in South Korea was 1% near the close.

As for Türkiye, the BIST 100 index in Borsa Istanbul followed a selective course on Wednesday, completing the day at 8,945.80 points with a 1.05% loss.

The US dollar/Turkish lira (USD/TRY) exchange rate completed the day at 31.9535 on Wednesday, down 0.3% from its previous close as it followed a selling course.

The exchange rate between the two currencies currently stands at 31.8885 as of 11.27 a.m. (0827GMT).

*Writing by Emir Yildirim