Weekly Market Analysis 8 - 12 May 2023

Last week, the US Federal Reserve (Fed) and European Central Bank (ECB) interest rate decisions, as well as non-farm employment data in the US on Friday, came to the fore in global markets. The US Federal Reserve (Fed), at its meeting on Wednesday, increased the policy rate by 25 basis points, in line with the expectations, to the range of 5.00-5.25%. Thus, the interest rate rose to the highest level since August 2007. Immediately afterwards, Fed Chairman Powell said in a statement regarding the decision that no decision has been taken yet to stop the rate hike, and that this will be evident in June. In its May meeting held on Thursday, the European Central Bank (ECB) increased the interest rates by 25 basis points in line with the expectations, increasing the refinancing rate to 3,75%, the deposit rate to 3.25% and the marginal funding rate to 4%. While reducing the rate of increase in interest rates, the bank also gave the signal to continue the increases. Nonfarm payrolls in the US increased by 253.000 in April, above expectations. Average hourly earnings increased by 0.5% compared to the previous month, while the increase was 4.5% on an annual basis. While the news about California-based PacWest, one of the regional banks experiencing financial difficulties in the USA, is evaluating its strategic options, including sales, it was reported that options including the sale of strategic assets were evaluated in the statement made by the bank after the news, and that talks with potential investors and partners who have shown interest in the recent period are continuing. While the shares of other regional banks were also negatively affected by the statements, there were reports that they are considering potentially selling all or part of Western Alliance, the Phoenix-based bank. Although the bank announced that the news did not reflect the truth, a selling trend was observed in the global markets due to the increasing concerns about the regional banks in the country with the Fed's interest rate decision. Gold rose as high as $2.079,12 an ounce as rising concerns about the US banking sector may force the Fed to cut rates earlier than expected and uncertainty over the US debt ceiling boosted safe-haven demands. While oil prices started to decline due to the increasing uncertainty about the US banking sector and the concerns about the slowdown in the economy, Brent oil decreased to 71,4 dollars a barrel.