Weekly Market / 27 February - 3 March 2023

The movement in ounce gold prices began to change the balance in the markets. Ounce gold, which started to move towards 2000 dollars, also created momentum on the gram gold side. Along with the ounce of gold traded at the peak of 9 months, gram gold also climbed to 1165 lira. Ounce gold prices rose to 1929 dollars. The main reason for the strengthening of gold is the fact that inflation in the USA is on a downward trend and therefore the expectation that the Fed will slow down the pace of interest rate increases and reduce interest rates in 2023.

The World Bank revised its economic growth forecasts downwards Last week, the World Bank revised its global growth forecast for 2023 from 3% to 1.7%. In its Global Economic Expectations report, the World Bank revised its growth expectations for the world economy for 2023 and 2024 downwards, announcing them at 1.7% and 2.7%, respectively. The organization cited high inflation, decreasing investments and tight monetary policy practices as the reasons for the revision. In the USA, CPI decreased by 0.1% on a monthly basis in December. While consumer prices in the USA decreased by 0.1% on a monthly basis in December, the improvement in inflation supported the expectations that the Fed would reduce the pace of interest rate hikes. Consumer prices in the USA decreased by 0.1% on a monthly basis in December, for the first time since May 2020. While annual CPI inflation in the country fell to 6.5%, the lowest in more than a year, the decline in energy prices played an important role in this development. The view that the Fed will increase interest rates by 25 basis points at its meeting that will end on February 1 is gaining ground.

The current account deficit reached 3.7 billion USD in November. According to the data announced by the CBRT, the current account deficit was 3.7 billion USD in November. While the foreign trade deficit continued to remain at high levels during this period, the 12-month cumulative current account deficit reached its highest level since August 2018 with 45 billion USD. The market‘s inflation expectations decreased. According to the January results of the CBRT‘s Market Participants Survey, the market‘s inflation expectation for the next 12 months decreased from 34.9% to 30.4%. While market participants‘ growth and current account deficit expectations for the end of 2023 remained flat, the year-end USD/TL forecast was realized at 23.12.

Last week, BIST-100 index decreased by 6.7%. Data showing that inflationary pressures have eased in the USA and statements made by Fed officials supported the global risk appetite. While a positive trend was observed in global stock markets, gold prices rose above the 1,900 USD level for the first time since May. The barrel price of Brent type crude oil completed last week at 85.3 USD with an increase of 8.5%. Domestically, the BIST-100 index recorded its fastest decline since December 2021, with 6.7% on a weekly basis. Bond interest rates and Turkey‘s 5-year CDS premium continued to increase. CBRT‘s first interest rate decision of the year will be followed. The first Monetary Policy Committee meeting of the Central Bank of the Republic of Turkey (CBRT) of the year will be held on Thursday, January 19. To be remembered, it was announced that the CBRT completed the interest rate reduction cycle, which it started in August, with a 150 basis point interest rate cut at its November meeting, in order to maintain the momentum in industrial production and employment and the continuity of structural gains in supply and investment capacity in an environment where risks related to global growth increased and a loss of momentum in economic activity was observed. In parallel with this guidance, the CBRT, which did not make a change in interest rates in the December meeting, is not expected to make a change in interest rates in the January meeting.

27.01-03.02.2023 The rise in gold prices continues unabated. While positive data from the USA affected gold positively, gram gold reached its highest levels in history. The movement in ounce gold prices started to change the balances in the markets. Ounce gold, which started to move towards 2000 dollars, also created momentum on the TL gram gold side. Along with the ounce gold traded at the peak of 9 months, gram gold also climbed to 1165 liras. Ounce gold prices rose to the level of 1929 dollars. The main reason for the strengthening of gold is the expectation that the inflation trend in the USA will decrease and the Fed‘s rate of increase in interest rates will slow down and interest rate cuts will be made in 2023. World Bank revised down its economic growth forecasts. Last week, the World Bank revised its global growth forecast for 2023 from 3% to 1.7%. In its Global Economic Prospects report, the World Bank revised its growth expectations for the world economy for 2023 and 2024 downwards and announced it as 1.7% and 2.7%, respectively. The organization pointed out high inflation, declining investments and tight monetary policy practices as the reason for the revision.

CPI in the US decreased by 0.1% on a monthly basis in December. While consumer prices in the USA decreased by 0.1% on a monthly basis in December, the improvement in inflation supported the expectations that the Fed will reduce the rate of interest rate hikes. Consumer prices in the US fell 0.1% on monthly basis in December for the first time since May 2020. While the annual CPI inflation in the country fell to 6.5%, the lowest in more than a year, the decline in energy prices played an important role in this development. The view that the Fed will raise interest rates by 25 basis points at its meeting, which will end on February 1, gains importance. The current account deficit was 3.7 billion USD in November. According to the data announced by the CBRT, the current account deficit was 3.7 billion USD in November. In this period, the foreign trade deficit remained at high levels, while the 12-month cumulative current account deficit reached 45 billion USD, its highest level since August 2018. The market‘s inflation expectations declined. According to the results of the CBRT‘s Market Participants Survey for January, the market‘s inflation expectation for the next 12 months decreased from 34.9% to 30.4%. While the growth and current account deficit expectations of market participants for the end of 2023 remained flat, the year-end USD/TL forecast was realized as 23.12.

BIST-100 index decreased by 6.7% last week. Data on the easing of inflationary pressures in the US and statements made by Fed officials supported the global risk appetite. While the global stock markets followed a positive course, gold prices rose above the 1,900 USD level for the first time since May. The barrel price of Brent crude oil also increased by 8.5% last week to 85.3 USD. Domestically, the BIST-100 index recorded its fastest decline since December 2021 with 6.7% on a weekly basis. Turkey‘s 5-year CDS premium continued to increase with bond interest rates. CBRT‘s first interest rate decision of the year will be followed. The first Monetary Policy Committee meeting of the Central Bank of the Republic of Turkey (CBRT) will be held on Thursday, January 19th. To be reminded, the CBRT announced that, in an environment where risks regarding global growth increased and economic activity decelerated, it was announced that the acceleration in industrial production and employment, as well as the continuity of structural gains in supply and investment capacity, ended the interest rate cut cycle that it started in August with a 150 basis point rate cut at its November meeting. Parallel to this guidance, the CBRT, which did not make any changes in interest rates at its December meeting, is not expected to make any changes in interest rates at its January meeting.

20-25.02.2023 Trying to heal the wounds of the earthquake While we were shaken by two major earthquakes centered in Kahramanmaraş on Monday, February 6, many of our provinces and citizens were negatively affected by the earthquakes, which were recorded as the most serious disasters of recent years. While we follow the developments in our provinces with great sadness and pain, efforts are being made to heal the wounds with all means, especially support work in the region. While many aids and donations have been made in this regard, the amount of donations in the "Türkiye One Heart" campaign, which was carried out jointly on all channels last week, exceeded 115 billion TL.

CBRT‘s interest rate decision will be important In the new week, the Monetary Policy Committee meeting of the Central Bank of the Republic of Turkey (CBRT) will be held in the country on Thursday, February 23. While the CBRT, which did not change the interest rates in the December and January meetings, stated in the January decision text that the current policy rate was sufficient, this change was perceived as a possible interest rate cut signal in the market. It is thought that the CBRT may reduce interest rates at this meeting in order to support the region and the economy after the earthquake disaster.

Important regulations were made in Borsa Istanbul Borsa Istanbul, which was closed on Wednesday, February 8 after the earthquake disaster, started trading again on Wednesday, February 15 last week, after being closed for 5 business days. Before the opening of the markets, important steps were taken and some measures were taken by relevant institutions, especially CMB and Borsa Istanbul. Among the regulations made in this regard, one of the most important steps was the BES regulation. The portion of the funds to which the state contribution is deposited in the Private Pension System that can be invested in the stock market has been increased from 10 percent to 30 percent. Accordingly, the investment ceiling for a single share increased from 1 percent to 5 percent. The funds were given 10 days to implement this change and readjust the portfolios. It is estimated that with this change, there will be a resource inflow of 8 - 10 billion TL into the market.

Domestic The new week starts with consumer confidence index data. Consumer confidence index, calculated from the results of the consumer trend survey conducted in cooperation with the Turkish Statistical Institute and the Central Bank of the Republic of Turkey, increased by 4.3% in February compared to the previous month; The index, which was 79.1 in January, became 82.5 in February. Eurozone Growth data and industrial production data were followed. The regional economy showed a growth rate of 0.1% on a quarterly basis and 1.9% on an annual basis in 4Q22, in line with expectations. Industrial production data was below market expectations, with a decrease of 1.1% on a monthly basis and 1.7% on an annual basis. With the reflections of the price developments in the USA, German 10-year bond interest rates tested the 2.57% level, while stock indices closed in minus.

USA On the first trading day of the week, markets seem to be closed due to President‘s Day. Therefore, there is no significant data flow to be disclosed. Manufacturing and services PMI data for February in the USA is expected to be announced on Tuesday, February 21. Last week, the observation that inflationary pressures in the USA had not yet started to decrease caused the upward trend in global bond interest rates to become evident. January PPI data increased by 0.7% on a monthly basis (market expectation: 0.4%), reaching its highest level since June, and increased by 6% on an annual basis (market expectation: 5.4%) due to the effect of high energy costs. Core PPI also exceeded market expectations with an increase of 0.5% on a monthly basis and 5.4% on an annual basis. Since the effects of the PPI outlook on the CPI are inevitable, following the PPI data that exceeded expectations, and as the expectations that the Fed might moderate its tight monetary policy decreased, the US 2-year - 10-year bond interest rate difference was at -91 basis points, at its most significant level since 1981.

20-25.02.2023 CBRT reduced the policy rate by 50 basis points. At the Monetary Policy Committee meeting held on February 23, the CBRT reduced the policy interest rate by 50 basis points to 8.5%. In the text published after the meeting, it was predicted that the earthquake disaster in our country would affect economic activity in the near term and would not have a permanent effect on the Turkish economy in the medium term. Stating that the measured interest rate reduction in question is sufficient to support the necessary recovery after the earthquake, the Board stated that the effects of the earthquake in the first half of 2023 will be closely monitored. It was noteworthy that the statement regarding the possibility of our main export markets going into recession was removed from the section of the text regarding global developments.

The number of foreign visitors increased by 56.5% on an annual basis in January. The number of foreign visitors to Turkey increased by 56.5% on an annual basis in January, reaching 2 million people. During this period, the number of foreign visitors marked the highest January in the data set published since 1993. While Istanbul was the city most visited by foreigners, 14% of the visitors came from the Russian Federation.

According to TurkStat data, foreign trade deficit in January increased by 38.4% compared to the same month last year, reaching 14.24 billion USD. The real sector confidence index decreased in February. The seasonally adjusted real sector confidence index decreased by 1 point in February compared to the previous month, falling to 102.4. While evaluations regarding export orders, production volume and general trend for the next three months were effective in this decline, evaluations regarding the total order amount in the last three months and the current period limited the decrease in the index. USA · According to the Fed minutes, participants stated that the restrictive policy should be maintained until incoming data gives confidence that inflation is on a continuing downward trend towards 2%, and this may take some time. The minutes also stated that almost all officials agreed at the meeting that it was appropriate to raise interest rates by 25 basis points, while a few were in favor of a larger increase of 50 basis points. On the other hand, it was stated in the minutes that the risks to the economic outlook were downward.

· The growth rate of the US economy in the last quarter of 2022 was revised from 2.9% to 2.7% due to the weakening of consumer spending. Eurozone · Inflation in the Eurozone was in line with expectations, with an increase of 8.6% on an annual basis and a decrease of 0.2% on a monthly basis in January. Core inflation increased above expectations with 5.3% in January compared to the same month of the previous year. · European Central Bank President Lagarde said that the growth in wages in the Eurozone is normal and that they do not see a spiral. · January inflation in Germany was in line with expectations and increased from 8.1% to 8.7% on an annual basis. Inflation increased by 1% on a monthly basis. · According to final data, the German economy shrank by 0.4% in the 4th quarter, above expectations. financial markets Global stock markets remained under pressure throughout the past week due to the impact of the Fed meeting minutes as well as data indicating that inflationary pressures continue. Domestically, the BIST-100 index completed the week with a moderate increase of 0.6%. While Turkey‘s 5-year CDS premium increased by 5 basis points last week; Turkish lira continued its horizontal course against the US dollar.