Global markets are focused on the inflation data to be released in the United States.

In global markets, while uncertainties regarding the commercial steps to be taken by the new administration in the U.S. and expectations that the Federal Reserve's (Fed) interest rate cut process may be extended over a longer period emerged, eyes were turned to the inflation data to be announced in the U.S. next week.

The impact of the economic policies that Donald Trump, who was re-elected as president in the U.S., will pursue in the fight against inflation complicates pricing, while the minutes of the Fed's last meeting released last week indicated that upside risks to the inflation outlook have increased.

Although Trump's name was not mentioned in the Fed's meeting minutes, it was emphasized that potential policy changes could affect the process, stating, "Officials expect inflation to continue to move towards 2%, but recent inflation data has been higher than expected, and potential changes in trade and immigration policy indicate that the process may take longer than anticipated."

UPWARD RISKS IN INFLATION HAVE INCREASED

In the minutes, "Almost all officials assessed that upside risks to the inflation outlook have increased. Officials stated that the FOMC is at or near the point where it would be appropriate to slow the pace of policy easing." According to the macroeconomic data released in the country last week, the JOLTS job openings reached 8 million 98 thousand in November 2024, the highest level in 6 months. ADP private sector employment recorded an increase of 122 thousand in December last year, below market expectations. The number of people applying for unemployment benefits for the first time fell to 201 thousand in the week ending January 4, reaching the lowest level in 11 months and coming in below market expectations.

NOTABLE INCREASE IN INFLATION EXPECTATIONS

The non-farm payroll data, which was the focus of the markets throughout the week, increased by 256 thousand in December last year, exceeding expectations, while the unemployment rate fell from 4.2% to 4.1%. The average hourly earnings, closely monitored by the Fed, rose by 0.3% to $35.69. The consumer confidence index measured by the University of Michigan in the U.S. fell to 73.2 in January, remaining below market expectations. Consumers' short-term inflation expectations rose from 2.8% to 3.3% in January, reaching the highest level since May 2024, while long-term inflation expectations climbed from 3% to 3.3%, marking the highest level since 2008. Analysts noted that the data showed employment growth accelerated last month and that the labor market finished the previous year on a solid footing, supporting the Fed's cautious approach to interest rate cuts this year. Following the employment data, the pricing in the money markets indicated that the Fed may not proceed with its first interest rate cut of the year before June.

GOLD PRICES INCREASED

The price of gold per ounce found buyers at $2,689, rising by 1.9% last week. The U.S. 10-year Treasury yield, which continued to rise amid concerns that inflationary pressures may persist, stabilized at 4.78% after reaching its highest level since October 2023 at 4.79% following the employment data. The dollar index completed last week with a 0.7% increase at 109.7, remaining at its highest level since November 2022.

After news that the U.S. would impose new sanctions on Russian energy companies, Brent crude oil stabilized at $79.2, increasing by 3.5% on a weekly basis.

NEW YORK STOCK EXCHANGE TRADED NEGATIVELY

On the corporate side, shares of U.S. airline Delta Air Lines gained more than 9.04% on the last trading day of the week after the company's financial results exceeded expectations in the last quarter of last year.

While fires continue in Los Angeles, California, shares of insurance companies recorded a decline. Analysts noted that this could be one of the most costly fires in U.S. history, stating that insured losses could reach billions of dollars considering the high values of residential and commercial properties in the affected areas. Shares of major U.S. insurance companies fell, with Travelers down 4.2%, Allstate down 5.63%, Chubb down 3.35%, American International Group down 1.27%, and Mercury General down 19.87%. With these developments, the S&P 500 index lost 1.94%, the Nasdaq index lost 2.34%, and the Dow Jones index lost 1.86% on a weekly basis. On Monday, consumer inflation expectations and federal budget balance will be followed, on Tuesday the Producer Price Index (PPI), on Wednesday the Consumer Price Index (CPI), the Fed's Beige Book Report, on Thursday weekly unemployment claims, retail sales, and on Friday construction permits, housing starts, capacity utilization rate, and industrial production data will be monitored.

EUROPEAN STOCK MARKETS TRADED POSITIVELY

While a positive trend was observed in Europe last week, eyes are turned to the final inflation data to be announced in the Eurozone and Germany in the new week. Despite concerns that Trump's policies could put pressure on global trade, risk appetite in the region remained strong last week, while the recession-inflation dilemma continues to be a topic of discussion. Concerns about recession continue to be one of the main economic agenda items in the region, while the recently resurgent inflation draws attention.

According to preliminary data released last week, the preliminary CPI in Germany for December increased by 0.4% month-on-month and 2.6% year-on-year, exceeding expectations. Thus, the annual inflation in the country has increased for the third consecutive month. In the Eurozone, the annual CPI, which was 2.2% in November, rose to 2.4% in December according to preliminary data. The preliminary CPI was 0.4% month-on-month in December.

FEAR OF INFLATION HAS INCREASED IN EUROPE AS WELL

According to the European Central Bank's (ECB) Consumer Expectations Survey, medium-term inflation expectations of consumers in the Eurozone have continued to rise for the second month. On the other hand, in the UK, the bond panic regarding government bonds continues to be a focus for investors throughout the week.

YIELDS ON UK GOVERNMENT BONDS REACHED A PEAK

Following the £2.25 billion bond auction by the UK Debt Management Office at the beginning of last week, the yield on 30-year government bonds reached its highest level since 1998, while 10-year borrowing costs saw the highest level recorded since the 2008 financial crisis. On a weekly basis, the FTSE 100 index in the UK rose by 0.30%, the CAC 40 index in France rose by 2.04%, the DAX 40 index in Germany rose by 1.55%, and the MIB 30 index in Italy rose by 2.82%.

Next Wednesday, inflation in the UK, growth in Germany, industrial production in the Eurozone will be monitored, followed by inflation in Germany and ECB meeting minutes in the Eurozone on Thursday, and inflation data in the Eurozone on Friday.

SELLING TREND IN ASIAN MARKETS EXCEPT SOUTH KOREA

Last week, a selling trend was observed in Asian markets, except for South Korea, while concerns about whether the Chinese government's policies to stimulate the economy will be successful support the risk perception in the region.

In China, struggling with weak domestic demand, the expected trade tariff steps from the new US administration continue to be one of the main agenda items for the economy. The Consumer Price Index (CPI) for December, announced last week, increased by 0.1% year-on-year, in line with expectations, while the Producer Price Index (PPI) for the same period decreased by 2.3%. Last week, China's 10-year bond yield fell below 1.6%, drawing attention, while it was observed that economic uncertainties in the country affected bond demand.

WEAK DOMESTIC DEMAND IN CHINA IS A CONCERN

Analysts stated that the lack of desired activity levels in the Chinese economy and the persistence of weak domestic demand are closely monitored by investors regarding potential risks in one of the world's largest economies.

Following the strengthening of inflation concerns in Japan, 10-year Japanese government bond yields are hovering around 1.21%, close to a 14-year high, while signals from the released data indicate that inflation is gaining strength, which is a major factor fueling selling pressure on bonds.

Bank of Japan (BoJ) Governor Kazuo Ueda emphasized last week that the timing of the BoJ's tightening monetary policy depends on economic developments, stating, "The timing to adjust the degree of monetary support will depend on future economic, financial, and price developments. We must also remain vigilant against various risks."

UNCERTAINTY PREVAILS IN JAPAN

Analysts noted that uncertainties regarding the timing and scale of the steps the BoJ will take in the upcoming period have kept the risk perception high, and the news flow regarding monetary policy is being closely monitored. With these developments, the Nikkei 225 index in Japan fell by 1.77% on a weekly basis, the Hang Seng index in Hong Kong fell by 3.52%, and the Shanghai Composite index in China fell by 1.34%, while the Kospi index in South Korea rose by 3.02%.

Next week, on Monday, China's foreign trade balance, on Tuesday, Japan's foreign trade balance, on Thursday, Japan's PPI, and on Friday, China's growth, industrial production, and retail sales will be monitored. Additionally, there will be no trading in the markets on Monday due to a holiday in Japan.

FOCUS ON NOVEMBER BALANCE OF PAYMENTS DATA IN DOMESTIC MARKETS

Last week, a downward trend was prominent in the domestic market. The BIST 100 index in Borsa Istanbul completed the week with a loss of 1.63%, finishing at 9,910.61 points, while attention turned to the balance of payments data for November to be announced next week. Economists participating in the AA Finance Balance of Payments Expectation Survey predicted that the current account would show a deficit of 2 billion 963 million dollars in November. They also forecasted that the current account deficit for 2024 would be 10 billion 273 million dollars.

TCMB TO CONDUCT A SURVEY OF MARKET PARTICIPANTS

Analysts noted that, from a technical perspective, the support levels for the BIST 100 index are at 9,850 and 9,750 points, while the resistance levels are at 10,000 and 10,100 points. Meanwhile, the Dollar/TL closed the week at 35.4040, slightly above the previous closing by 0.1%. In the domestic market, next week, the balance of payments, retail sales, the private sector's foreign credit debt on Thursday, weekly money and banking statistics, short-term external debt statistics, housing price index, and the Central Bank of the Republic of Turkey (TCMB) market participants survey will be monitored.