Global markets tumble on Fed policy, trade fears

ISTANBUL

Global markets faced significant selling pressure on Thursday, as the US Federal Reserve’s cautious stance on rate cuts and President-elect Donald Trump’s anticipated protectionist policies raised concerns over prolonged inflationary challenges.

The Fed is expected to cut rates just twice in 2025, analysts say, while macroeconomic data suggesting persistent economic strength has fueled speculation that this could go down to only one reduction in interest rates.

The US economy grew by 3.1% in the third quarter, surpassing expectations, according to Thursday's data. The Personal Consumption Expenditures (PCE) index, excluding food and energy, rose by 2.2%, exceeding forecasts.

First-time unemployment claims dropped to 220,000 last week, below market predictions. Meanwhile, the US Philadelphia Fed Manufacturing Index fell by 16.4%, indicating continued contraction in the sector.

On the housing front, second-hand home sales rose by 4.8% in November, beating expectations.

Gold prices stabilized at $2,600 per ounce, while US 10-year Treasury bond futures hovered just below the previous close at 4.56% on Friday.

The US Dollar Index climbed to 108.5, marking its fourth consecutive day of gains, driven by expectations of a slower pace of Fed rate cuts.

Brent crude oil extended its decline for the fifth consecutive day, trading at $72.10 per barrel on Friday amid concerns of weakening demand in China.

Meanwhile Bitcoin, which saw a surge following the US presidential elections, briefly surpassed $108,000 but fell to $97,000 on Friday and continues to go down after the Fed’s rate decision.

US and European markets

On the New York Stock Exchange, the S&P 500 dropped 0.09%, and the Nasdaq fell 0.1%, while the Dow Jones rose 0.04%, ending a 10-day losing streak on Thursday. US index futures started Friday on a negative note.

In Europe, the Bank of England (BoE) kept its policy rate steady at 4.75%, citing a rise in annual inflation last month and weaker-than-expected economic growth.

Sweden’s central bank Sveriges Riksbank lowered its policy rate by 25 basis points to 2.5%, as anticipated, while Norway’s Norges Bank maintained its rate at 4.5%.

European stock markets closed lower on Thursday: the FTSE 100 lost 1.14%, the FTSE MIB 30 fell 1.78%, the CAC 40 declined 1.22%, and the DAX 40 slid 1.35%. European index futures opened Friday on a downward trend.

Asian markets

Asian markets showed mixed results on Thursday, as Japan reported last month's inflation at 2.9%, aligning with expectations. Core inflation stood at 2.4%.

Despite growing speculation that the Bank of Japan may raise interest rates in 2024, the US dollar/Japanese yen exchange rate remained stable near 157.

The People's Bank of China (PBoC) held its one-year Loan Prime Rate (LPR) at 3.1% and its five-year LPR at 3.6%, in line with forecasts.

In market performance, Japan's Nikkei 225 fell 0.2%, South Korea's Kospi index dropped 1.6%, and China's Shanghai Composite Index edged down 0.1%. The Hang Seng Index in Hong Kong remained flat near the close.

Türkiye’s markets

In Türkiye, the BIST 100 dropped 1.52% on Thursday, closing at 9,765.12.

The US dollar/Turkish lira exchange rate rose 0.2% on Thursday to close at 35.0940, climbing further to 35.1580 on Friday.

Türkiye’s Central Bank announced a $4.1 billion increase in total reserves last week, reaching a record high of $163.5 billion.

* Writing by Emir Yildirim