Global Markets Focus On Fed Meeting

After a day of mixed figures due to high volatility, global markets opened Wednesday with a focus on the US Federal Reserve (Fed) decisions at the first meeting of the year and the statements to be made by Fed Chairman Jerome Powell.

Meanwhile, rising tensions between Russia, the US and NATO over Ukraine have dampened risk appetite.

As the war of words continued, US President Joe Biden warned of possible sanctions on Russian President Vladimir Putin if he invaded Ukraine. German Chancellor Olaf Scholz and French President Emmanuel Macron warned that if Russia displays an aggressive attitude toward Ukraine, the price will be heavy.

Also, NATO Secretary General Jens Stoltenberg stated that the alliance will respond to Russia's agreement offer this week.

Kremlin Spokesperson Dmitriy Peskov said Russia is worried about the US role in fanning tensions between Russia and Ukraine.

Although geopolitical risks continue to be at the top of the agenda, investors will focus on the Fed Open Market Committee (FOMC) meeting on Wednesday and Powell's speech, which will be critical for the interest rate hike and the balance sheet reduction process.

Markets expect four interest rate hikes from the Fed for this year, with the first step in March.

Amid possibility of the Fed to display a more hawkish stance than expected, a sales-heavy trend was observed in the New York stock market on Tuesday.

Although the indices that started the day with a decrease went into the positive region during the day, the Dow Jones index lost 0.19%, the S&P 500 index lost 1.16% and the Nasdaq index lost 2.28% at the close.

The US 10-year bond yield is at 1.77% on Wednesday, after testing 1.80% on Tuesday.

While geopolitical risks and problems related to energy supply continued to be the main factors for investors in European stock markets, the optimism regarding the announced balance sheets supported the stock markets.

Also, the expectations that the Fed will follow a more hawkish stance in interest rate hikes negatively affected technology stocks. However, banking sector stocks showed a strong performance.

With these developments, the DAX 30 index rose 0.75% in Germany, the FTSE 100 index rose 1.02% in the UK and the CAC 40 index rose 0.74% in France.

The euro/dollar parity closed the day just above 1.13 after seeing the lowest level in a month with 1.1263 on Tuesday.

In the Asian side, the developments related to the pandemic, the news flow regarding the credit market in China and increasing inflation in Japan market were main topics.

In addition to these developments, with the effect of the increase in the global risk perception, the Asian stock markets saw the lowest levels since December 2020.

Turkiye's BIST 100 index closed Tuesday at 1,945.07 points with an increase of 1.82% and it opened the day looking up on Wednesday.

Analysts stated that the Russia-Ukraine tension will continue to be closely monitored and the volatility in asset prices may continue before the Fed's decisions.

Writing by Gokhan Ergocun -