Global markets tread carefully in anticipation of Fed’s monetary policy decision

By Mahmut Cil

ISTANBUL (AA) – Global markets stay cautious ahead of the Fed’s monetary policy decision to be announced later on Wednesday, as the bank is likely to cut rates for the first time in four years.

Estimates in the money markets show that the Fed is 60% likely to cut its interest rates by 50 basis points, while the possibility of a total 125-basis-point cut by the end of the year is still on the table.

The monetary policy decision and the signals from Fed Chairman Jerome Powell’s statements will influence asset prices, as volatility is expected to go up in the markets due to the uncertainties, analysts say.

Meanwhile, US retail sales climbed 0.1% month-on-month in August, against the expectations of a drop, according to recent data. The unexpected increase reveals that costumer spending remains relatively strong.

Industrial production in the US increased 0.8%, above market expectations, in the same period.

At the same time, US chipmaker Intel’s shares soared 2.7% after the announcement of an expanded strategic cooperation with Amazon Web Services.

On Tuesday, the US 10-Year Bond balanced at 3.65%, the US Dollar Index fell 0.1% to 100.8, and the barrel price of Brent crude oil rose 0.9%.

As for US index future contracts, while the Dow Jones fell 0.04%, the Nasdaq increased 0.20%, and the S&P 500 hit a record high of 5,670.81, closing Tuesday at a rise of 0.03%.

In the European stock market, a favorable course was seen, while the inflation data for the UK and the eurozone to be announced on Wednesday is on the agenda.

While inflation is slowing down across Europe, inflation concerns have been replaced by recession concerns, analysts note.

The European Center for Economic Research (ZEW) Economic Confidence Index plummeted to 3.6 points in September, down from August’s level of 19.2.

Gediminas Simkus, member of the Governing Council of the European Central Bank (ECB), said on Tuesday that the bank is unlikely to cut rates by the next month.

As for European index future contracts, the DAX 40 rose 0.50%, the CAC 40 0.51%, the FTSE 100 0.38%, and the FTSE MIB 0.63%.

In Asia, a cautious course stood out on Wednesday, while Hong Kong and South Korea stock markets are closed off due to public holidays.

Japan’s foreign trade deficit was 695.3 billion Japanese yen ($4.9 billion) in August, according to data released on Wednesday, while Japanese core machinery orders for last month were down 0.1% month-on-month, below estimates, though up 8.7% on an annual basis.

The US dollar/Japanese yen parity closed at 142.4 on Tuesday, up 1.3%, starting Wednesday at a 0.7% decline, down to 141.4.

On Tuesday, the Nikkei 225 climbed 0.2% and the Shanghai Composite Index lost 0.1%.

Meanwhile, Türkiye’s BIST 100 followed a buying-heavy course, ending Tuesday at 9,758.14 points, up 1.89% compared to the previous close.

The US dollar/Turkish lira exchange rate closed Tuesday at 34.0808, up 0.1%, currently trading at 34.0830 on a horizontal course on Wednesday.

*Writing by Emir Yildirim