Global markets see positive trend following Fed’s green light on interest rate cuts

By Murat Aslan

ISTANBUL (AA) – Global markets saw a positive trend after the Fed green-lit interest rate cuts on Wednesday, while the risk appetite in the markets strengthened.

The Fed issues a Federal Open Market Committee (FOMC) statement saying that, “in recent months, there has been some further progress toward the Committee’s 2% inflation objective.”

Fed Chairman Jerome Powell stated at a press conference following the bank’s monetary policy decision that a rate cut could be on the agenda in September, so long as the labor market remains strong and the confidence in inflation strengthens.

Powell noted that although the bank has yet to make any decisions regarding future meetings, including the one in September, the Committee’s opinion is that the appropriate time to lower the policy rate is soon.

Meanwhile, US macroeconomic data on Wednesday showed that the private sector employment increased by 122,000 in July, short of market expectations, while the annual wage rose 4.8%, the slowest increase in the last three years.

Given these developments, the money markets’ estimates on the probability that the Fed will make a total of three interest rate cuts this year continues to strengthen.

At the same time, Meta Platforms released its balance sheets revealing that the Facebook-maker’s revenue soared 22% and net profit 73%, noting that the company expects for the third quarter a revenue of $38.5 billion to $41 billion.

The bond markets followed a buying-heavy course on Wednesday amid the Fed’s monetary policy decision. The US 10-Year fell to 4.06%, while the US Dollar Index dropped to 104.

As for the ounce price of gold, after rising 1.5% on Wednesday, it fell 0.1% on Thursday, as it is currently trading at $2,446.

The barrel price of Brent crude oil is trading at $81.4 amid concerns that the conflict in the Middle East could expand to a wider area.

On the New York Stock Exchange, the Nasdaq index rose 2.64%, the S&P 500 1.58%, and the Dow Jones 0.24% on Wednesday. US index future contracts started Thursday with increase.

As for Europe, a buying-weighted course was prominent on Wednesday, except for Italy, and all eyes turned to the interest rate decision of the Bank of England (BoE).

BoE Governor Andrew Bailey’s statements are expected to increase asset price volatility, while the bank is almost certain to keep its policy rate unchanged.

European data released on Wednesday revealed that the inflation in the eurozone exceeded expectations with 2.6% annually.

On Wednesday, the FTSE 100 index in the UK increased 1.13%, the CAC 40 in France 0.76%, and the DAX 40 in Germany 0.53%, while the MIB 30 index in Italy fell 0.43%. European index future contracts started Thursday on a positive trend.

Meanwhile, Asian equity markets saw a buying-weighted course on Thursday, except for Japan.

Selling pressure in Japanese equity markets increased following the statements of the Bank of Japan (BoJ) Governor Kazuo Ueda.

The BoJ raised its policy rate by 15 basis points to 0.25% on Wednesday.

Ueda stated that the bank is ready for further rate hikes if economic data comes in line within expectations, causing a downward trend in equity markets.

The US dollar/Japanese yen parity tested its lowest level since March 15 at 148.51 on Thursday.

Japan’s and China’s manufacturing Purchasing Managers’ indices (PMI) fell to 49.1 and 49.8, respectfully, according to data released on Thursday.

Near the close, the Kospi index in South Korea climbed 0.5%, the Hang Seng index in Hong Kong 0.2%, and the Shanghai Composite index in China 0.1%, while the Nikkei 225 index in Japan fell 0.27% on Wednesday.

As for Türkiye, the BIST 100 index fell 0.5% to 10,638.58 on Wednesday.

The US dollar/Turkish lira exchange rate closed Wednesday at 33.1421, up 0.2%, and opened at 33.1740 on Thursday.

*Writing by Emir Yildirim