What You Need to Know Before the Market Opens (December 11)

What You Need to Know Before the Market Opens (December 11)

In recent days, the most influential factor in global markets has been the Fed's guidance. The inflation hovering around 3%, the possibility that real interest rates could approach low levels in the new administration period, and the likelihood of continued fiscal expansion have strengthened the perception that the Fed may take a more limited easing step than anticipated.

The projection released in the dot plot shows that only a limited interest rate cut by 2026 is seen as a reasonable scenario, demonstrating how the markets are evaluating probabilities. The decision for a 25 basis point cut during yesterday's meeting aligned with a development already priced in by the market.

Interest Rate Cut and Its Effect on Markets

The Fed's decision passed by a vote of 9 to 3, while Miran's view for a 50 basis point cut drew attention. In contrast, Goolsbee and Schmid expressed their preference for keeping interest rates unchanged, highlighting the divergence within the committee.

The Fed announced that starting from December 12, it would begin purchasing $40 billion worth of Treasury bonds monthly to alleviate the tight conditions in short-term funding. This announcement quickly provided relief in the bond market, lowering the US 10-year yield to 4.13% and the two-year yield to 3.52%.

The projections indicate that only a single 25 basis point cut is expected for next year, while upward revisions in growth forecasts and downward updates in PCE predictions are supporting risk appetite in the markets. Fed Chairman Powell, during his press conference, managed to soften the overly hawkish perception by adopting a balanced view of the outlook.

Developments in the Commodity Market

Significant movements are being observed in the commodity market. Spot gold slightly retraced from a one-week high, while silver tested record levels with over a 100% premium year-to-date. US futures were under pressure due to Oracle's earnings not meeting expectations. Particularly, banking stocks were the center of selling during the day.

Brent crude stabilized around $62 amid tensions on the US-Venezuela front. The dollar index's decline below 99 caused the euro/dollar exchange rate to rise to 1.17.

Important Developments for Investors

Borsa Istanbul started yesterday's trading day with a buying momentum but could not maintain its gains due to increasing cautiousness throughout the day. The BIST 100 closed down 0.40% at 11,194 points. Today's decision by the Central Bank of the Republic of Turkey (TCMB) on interest rates remains the focal point for the market.

The new day is expected to be a week of increased volatility, with the TCMB's interest rate decision anticipated to reverberate across the markets. Additionally, geopolitical issues and domestic political developments may have an impact on pricing.