Stock Indices Plunge Amid Middle Eastern Tensions and Economic Concerns
Explore the recent plunge in global stock markets, driven by economic uncertainties and geopolitical tensions, with a focus on BIST 100, New York, and European stock exchanges. Learn about the impact on currency and commodity markets, and the looming fears of recession.
The Istanbul Stock Exchange’s BIST 100 index closed the day with a significant decline of 3.01%, ending at 10,473.47 points. This downturn reflects a loss of 324.62 points from the previous close, with the total trading volume reaching 82.6 billion Turkish lira. The banking sector index fell by 3.95%, and the holding index decreased by 3.14%. Among the various sectors, communication was the hardest hit, losing 4.44%.
Currency Exchange Rates Rise
Alongside the stock market downturn, foreign exchange rates also saw upward movement. The euro appreciated by 1.40% to reach 36.27, while the dollar rose by 0.29% to 33.20. Analysts suggest that despite the Federal Reserve’s signal to potentially cut interest rates starting in September, recent economic data from the U.S. indicates a sharper slowdown than anticipated, contributing to negative market sentiment.
U.S. Employment Data Signals Economic Slowdown
The U.S. employment data, released today, showed non-farm payrolls increasing by only 114,000 in July, falling short of expectations. The unemployment rate rose from 4.1% to 4.3%, marking the highest level since October 2021. This is the fourth consecutive month of rising unemployment, deviating from market expectations of a stable 4.1% rate.
New York Stock Exchange Opens with Losses
The New York Stock Exchange opened sharply lower as concerns over the economy grew following the weaker-than-expected employment data. The Dow Jones Industrial Average fell by 0.68% to 40,075.33 points, the S&P 500 decreased by 1.29% to 5,376.63 points, and the Nasdaq Composite dropped by 2.41% to 16,780.44 points.
Despite the Federal Reserve’s earlier indication of potential rate cuts in September, the economic data suggesting a more pronounced slowdown increased market fears. The average hourly earnings, a key metric monitored by the Fed, rose only by 0.2% in July, underscoring the deteriorating labor market conditions. Analysts warned of growing concerns that the economy might slip into a recession.
Market Anticipation of Fed’s Rate Cut
Following the release of the employment data, market participants are pricing in a 60% probability of a 50 basis point rate cut by the Fed in September. As inflation fears give way to recession concerns, there is an increased demand for safe-haven assets, with the yield on the U.S. 10-year Treasury note falling to 3.85%.
In the foreign exchange market, the dollar index decreased by 0.97% to 103.19, while the euro/dollar pair climbed by 0.9% to 1.089. The price of gold surged by 0.97% to $2,470.06 per ounce at 5 p.m. Turkish time.
Corporate Earnings and Market Impact
In the midst of monitoring financial results, notable U.S. technology giants reported mixed earnings. Apple and Amazon saw revenue increases during the April-June period, while Intel’s revenue declined. Amazon’s shares dropped nearly 10% after failing to meet revenue expectations, and Intel’s shares plummeted over 27% following announcements of revenue decline and impending layoffs. Conversely, Apple’s shares rose over 1% as its revenue exceeded forecasts despite a slight drop in iPhone sales.
European Stock Markets Follow Suit
Similar to the domestic and U.S. markets, European stock exchanges experienced negative trends. Germany’s DAX 40 fell by 2.33%, the UK’s FTSE 100 by 1.31%, France’s CAC 40 by 1.61%, Spain’s IBEX 35 by 1.67%, and Italy’s MIB 30 by 2.55%.
U.S. Employment Data Affects Bitcoin
The disappointing U.S. employment report also impacted the cryptocurrency market. Bitcoin, which was trading above $65,000 before the data release, dropped below $63,000 following the announcement.
Looking Ahead: Inflation Data Expected
Looking ahead to next week, analysts expect to focus on a heavy data schedule, including inflation figures, the real effective exchange rate, industrial production, and the Turkish Central Bank’s inflation report domestically. Internationally, the agenda includes Germany’s factory orders, industrial production, inflation, the Eurozone’s Producer Price Index (PPI), retail sales, and the U.S. trade balance and weekly unemployment claims. Technically, support levels for the BIST 100 index are seen at 10,450 and 10,400 points, with resistance at 10,700 points.
