Global markets shaken with mounting recession concerns

By Burhan Sansarlioglu

ISTANBUL (AA) – Global markets started the new week with a historic downward pressure due to increasing recession concerns in the US, causing selling pressure to intensify.

The selling-weighted course in the global markets persisted through the new week, as the US employment data fueled recession concerns, while the Fed left its policy rate unchanged on Wednesday, signaling a cut in September.

US non-farm employment increased 114,000, well below expectations, while the June’s increase of 206,000 was downwardly revised to 179,000.

Chicago Fed President Austan Goolsbee stated that the bank will not overreact to the non-farm employment data as there will be other data to come out before the next meeting, though he added that the unemployment rate rising above 4.1% needs to be responded to.

Richmond Fed President Thomas Barkin stated that one more employment report will be released before the bank has to make a policy decision.

The probability of the Fed’s cutting its policy rate by 50 basis points in September rose above 75% in the money markets.

Meanwhile, the demand for safe-haven assets increased due to recession concerns, and the US 10-Year bond balanced at 3.73% after falling to 3.72%, which was its lowest since June 2023.

The US dollar Index decreased to 102.9 and the ounce price of gold fell 0.3%, currently trading at $2,435, while Bitcoin fell over 10% to $52,900.

The barrel price of Brent crude oil completed Friday at $77.3, down 3.3%, and started the day hovering at $76.2, with a 1.65% decrease.

On the New York Stock Exchange, the Nasdaq index fell 2.45%, the S&P 500 1.84%, and the Dow Jones 1.51% on Friday. US index future contracts started Monday with nearly a 4% decline.

As for Europe, a sales-heavy course was prominent on Friday, as analysts stated that the signals from European macroeconomic data have revealed concerns over economic activity and recession in the region, while the risk perception strengthened similar to the US.

The European Central Bank (ECB) is certain to cut interest rates in September, while the Bank of England (BoE) is estimated to continue interest rate cuts with a 50% probability in the money markets.

Meanwhile, the FTSE 100 index in the UK decreased 1.31%, the CAC 40 in France 1.61%, the DAX 40 in Germany 2.33%, and the MIB 30 in Italy 2.55% on Friday. European index future contracts started Monday on a decline.

As for Asian equity markets, historic declines were seen across the board due to increasing recession concerns in the US.

The risk perception in Japan’s assets reached an extreme level after the expectations that the Bank of Japan (BoJ) may have entered an interest rate hike cycle, coupled with increased recession concerns in the US, analysts say.

Analysts noted that the strengthened Japanese yen, in addition to the BoJ’s hawkish statements, and the concerns that the increasing recession concerns worldwide could affect Japanese exports influenced the selling pressure in the nation’s stock markets.

At the same time, the US dollar/Japanese yen parity tested its lowest since January at 142.2.

The Nikkei 225 index in Japan fell 12.6%, the Kospi index in South Korea 9.4%, and the Hang Seng index in Hong Kong 0.2%, while the Shanghai Composite index in China rose 0.1%.

The Nikkei 225’s trading was suspended by triggering circuit breakers multiple times amid declines to prevent panic selling.

Meanwhile, China’s Purchasing Managers’ Index (PMI) came in above expectations at 52.1, according to data released on Monday.

As for Türkiye, the nation’s stock market followed a sales-heavy course on Friday, and the BIST 100 index completed at 10,473.47 points, down 3.01% its previous close.

Analysts stated that the support positions for the BIST 100 are 10,450 and 10,400 points, while resistance position is at 10,700 points.

The US dollar/Turkish lira exchange rate completed Friday at 33.2052, up 0.3%, and it is currently trading at 33.2840, up 0.2% on Monday.

Türkiye’s inflation data, European and US PMI data to be announced, and the eurozone’s Producer Price Index (PPI) and Sentix investor confidence data will be monitored on Monday, analysts said.

Economists participating in Anadolu’s inflation expectations survey estimated that Türkiye’s Consumer Price Index (CPI) rose 3.51% in July, and on average, economists said that the annual inflation is expected to fall to 62.23% from 71.61% in the previous month.

*Writing by Emir Yildirim