Turkey's Inflation Sees Biggest Monthly Jump Since August, Nears 65% Year-on-year

Economic

Summary:

In January, Turkish inflation logged its biggest monthly jump since August with a 6.7% rise from December, while year-on-year inflation hit nearly 65%.

The consumer price index (CPI) for the country of 85 million people increased by 64.86% annually, up slightly from the 64.77% of December. Sectors with the largest monthly price rises were health at 17.7%, hotels, cafes and restaurants at 12%, and miscellaneous goods and services at just over 10%. Clothing and footwear was the only sector showing a monthly price decrease, with -1.61%.Food, beverages and tobacco, as well as transportation, all increased between roughly 5% and 7% month-on-month, while housing was up 7.4% since December.

In January, Turkish inflation logged its biggest monthly jump since August with a 6.7% rise from December, while year-on-year inflation hit nearly 65%, according to the Turkish Central Bank's figures released Monday.

Food, beverages and tobacco, as well as transportation, all increased between roughly 5% and 7% month-on-month, while housing was up 7.4% since December.

The monthly rises, economists say, stem from a significant increase to the minimum wage that Turkey's government mandated for 2024. The minimum wage for the year has increased to 17,002 Turkish lira ($556.50) per month, a 100% hike from January 2023.

Turkey's central bank has been on a prolonged mission to bring down inflation, implementing eight consecutive interest rate hikes since May 2023, for a cumulative 3,650 basis points. The bank's latest hike, on Jan. 25, raised the key interest rate by 250 basis points to 45%.

The more conventional approach follows several years of unorthodox policy during which Ankara refused to tighten rates despite ballooning inflation. The lira is down 38% against the dollar year to date and has lost more than 80% of its value against the greenback over the last five years.

The latest inflation print comes just days after Turkey's Central Bank Governor Hafize Gaye Erkan announced her resignation, saying the decision was due to a "reputation assassination" campaign and the need to protect her family.

Erkan became the bank's central governor by presidential decree in June of 2023, and led — along with Turkish Finance Minister Mehmet Simek — the turnaround in Turkey's monetary policy and subsequent series of interest rate rises.

She was quickly replaced by deputy central bank Governor Fatih Karahan, who spent nearly a decade as an economist at the Federal Reserve Bank of New York.

January's inflation figures "highlight the continued strength of services inflation and may put pressure on new central bank governor Karaham to restart the central bank's tightening cycle," Liam Peach, senior emerging markets economist at London-based Capital Economics, wrote in a research note.

"The fact that inflation didn't rise significantly more than expected in January is positive given the uncertainty about the impact of the minimum wage hike," Peach wrote. "But the figures present a small setback to the disinflation process and highlight the continued strength of services inflation. For now, the central bank's end-year inflation forecast of 36% remains intact."

Source：NBC

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Ukadike Micheal

Economic

Commodity

Energy security takes center stage in an international gathering in India this week, as Prime Minister Narendra Modi showcases progress in renewable electricity and addresses power price control efforts. The event also serves as an opportunity to address challenges in trade with Russia, particularly in the wake of declining flows of discounted oil. The makeup of Russia's delegation remains undisclosed, but reports suggest Rosneft CEO Igor Sechin will attend. Russian oil imports to India surged in 2022 but have declined recently due to payment hurdles and increased enforcement of a $60 per barrel price cap by the US.

Russia's share of India's oil imports dropped to 31% in January, down from 43% in June 2023, highlighting challenges in maintaining the flow of discounted barrels. The decline is attributed to increased scrutiny, payment issues, and tighter restrictions on middlemen and shipping companies involved in the trade. Tankers carrying Sokol crude destined for India are idling off Singapore, with uncertainty about their next move. The increased scrutiny coincides with global supply challenges, leaving import-reliant countries with reduced bargaining power. India must also balance its reliance on discounted Russian oil with the need to maintain ties with traditional suppliers like Saudi Arabia and Iraq.

Compounding the challenges, soaring freight rates due to vessel rerouting following Red Sea disruptions limit arbitrage opportunities for refiners. Talks between Indian officials and Russian executives are expected to focus on payment methods, including the use of the yuan, favored by Moscow, and potential acceptance of the rupee. Discussions may also address logistics, with considerations for new intermediaries and banks as Dubai faces pressure to clean up its reputation as a conduit for restricted oil.

As India navigates these challenges, it faces an upcoming general election, further complicating its energy security strategy. The technical viewpoint on these developments suggests potential disruptions in oil supplies could impact global oil prices, particularly if India's bargaining power weakens amid reduced Russian imports and increased global supply challenges.

The energy landscape at the India conference underscores the delicate balance between energy security, geopolitical tensions, and economic considerations. As India grapples with trade challenges and strives for diversified and secure energy sources, the global implications on oil prices remain a key consideration. The outcome of discussions between Indian and Russian officials will shape the trajectory of oil flows, with potential ripple effects on the broader energy market.

Source: Bloomberg

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Ukadike Micheal

Economic

Stocks

Investors are demanding perfection from tech giants this earnings season, particularly the "Magnificent Seven" group, which has been the driving force behind the stock market's growth and profits. After strong quarterly results from five of these companies last week, including Meta's impressive sales growth and initiation of its first dividend, investors are becoming discerning in their rewards. While Facebook's Meta and Amazon experienced significant stock increases, other tech giants such as Alphabet, Microsoft, and Apple faced share declines, despite reporting higher-than-expected profits and sales.

The Magnificent Seven, leading the stock market with bets on benefiting from the AI technology boom, have played a crucial role in pushing the overall market to repeated records. The recent stumbles in the tech sector have raised questions about justifying high valuations, and analysts point out that without the Magnificent Seven, the broader stock market's earnings would appear much weaker.

Concerns about high valuations and the challenge of justifying them intensify as investors question when the AI-related spending by tech companies will translate into tangible revenue and profit. Despite considerable investments in AI, the companies have yet to see substantial results. The recent decline in tech stocks was further exacerbated by diminished hopes for near-term interest rate cuts, and Federal Reserve Chair Jerome Powell's statement on the unlikelihood of a March rate cut contributed to a 1.6% fall in the S&P 500, its worst day since September.

However, some investors remain unfazed by the recent selloffs, emphasizing a focus on fundamentals rather than short-term market movements. The performance of the tech sector, particularly the Magnificent Seven, is closely watched as they play a pivotal role in shaping overall market earnings. Excluding Tesla, the Magnificent Seven is projected to report a robust 62.8% jump in earnings for the fourth quarter, while the other 494 companies in the S&P 500 are expected to post an 8.6% decline.

As the tech giants grapple with meeting high investor expectations, the broader market's reliance on their success becomes evident. The big question for investors remains the timeline for AI-related spending to translate into meaningful returns. Despite narratives around the potential of AI, caution is advised, with some investors warning that buying tech stocks at high prices might yield poor results, even if AI lives up to its hype.

The earnings season for tech giants is unfolding under the scrutiny of investors demanding perfection, especially from the Magnificent Seven. The performance of these companies not only shapes the narrative for the tech sector but also significantly influences the overall stock market. As the tech giants navigate challenges and investors weigh the potential returns on AI investments, the market continues to grapple with questions about valuations, profitability, and the broader economic landscape.

Source: Wall Street Journal

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Samantha Luan

Economic

Stocks

The main index in the smaller market in Shenzhen sank 5.4% and the Shanghai Composite index slipped more than 2% before recovering some lost ground.

U.S. futures declined and oil prices were higher.

On Sunday, the China Securities Regulatory Commission said it would redouble enforcement of measures against crimes such as market manipulation and malicious short selling, while guiding more medium and long-term funds into the market.

The move appeared to do little to reassure investors who have been pulling money out of the markets for months. Last week, Chinese stocks capped their worst week in five years.

The Shenzhen A-shares index took the brunt of the selling, falling 5.4%. The Shanghai Composite was trading down 0.8% to 2,707.87 in volatile trading.

In another blow to market sentiment, a report said China’s services sector grew at a slightly slower rate in January, with the purchasing managers’ index falling to 52.7 from 52.9 in December, according to a private-sector survey Monday. A PMI above 50 indicates expansion when compared to the previous month.

Elsewhere in Asia, Tokyo’s Nikkei 225 index climbed 0.6% to 36,390.31.

Australia’s S&P/ASX 200 sank 1% to 7,623.30. South Korea’s Kospi shed 0.6% to 2,599.62.

On Friday, Big Tech stocks once again carried Wall Street to a record, even though the majority of stocks fell due to renewed worries about risks of a hot economy.

Big gains for Meta Platforms and Amazon helped drive the S&P 500 index up by 1.1% and closed at 4,958.61. It’s in a torrid run where it’s climbed in 13 of the last 14 weeks. The Big Tech stocks, which are two of Wall Street’s most influential, also vaulted the Nasdaq composite up by 1.7%.

But the Dow Jones Industrial Average, which has less of an emphasis on tech, rose by a more modest 0.3% to 38.654.42. And the Nasdaq jumped 1.7% to 15,628.95.

Stocks felt pressure from much higher yields in the bond market after a report showed U.S. employers hired many more workers last month than economists expected.

That's great for workers and helps keep the risk of a recession at bay, but it could preserve some upward pressure on inflation and lead the Federal Reserve to wait longer before it begins cutting interest rates.

Hopes for such cuts, which can relax the pressure on the economy and goose investment prices, have been a major reason the U.S. stock market has surged to record heights.

Fed Chair Jerome Powell said earlier this week that it’s unlikely cuts will begin as soon as traders had been hoping.

The jobs report landed on Wall Street amid a maelstrom of profit reports.

Meta Platforms, the owner of Facebook and Instagram, soared 20.3% after it reported stronger profit for the latest quarter than expected and said it would start paying a dividend to its investors.

Amazon rallied 7.9% after it reported stronger profit and revenue for the latest quarter than expected.

They’re both members of a small group of Big Tech stocks known as the “Magnificent Seven” responsible for the majority of Wall Street’s run to a record. Their huge gains have set expectations very high for their growth, which they need to meet to justify the big runs for their stock prices.

Apple, another member of the Magnificent Seven, slipped 0.5% even though it reported better profit than expected.

Charter Communications slumped 16.5% for the sharpest loss in the S&P 500 after it reported weaker profit for the latest quarter than expected.

In other trading, benchmark U.S. crude rose 39 cents to $72.67 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, rose 52 cents to $77.85 a barrel.

The U.S. dollar fell to 148.38 Japanese yen from 148.43 yen. The euro cost $1.0779, down from $1.0784.

Source：hindustantimes

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Ukadike Micheal

Economic

Bond

Stocks

Forex

The faith of bond traders in the Federal Reserve's anticipated series of interest-rate cuts this year is being tested by the resilient US economy. The unexpected surge in job creation in January has alleviated pressure on the central bank to initiate monetary policy easing immediately, prompting traders to scale back bets on an early rate cut.

Federal Reserve Chair Jerome Powell emphasized a cautious, wait-and-see approach in a recent interview, dissuading expectations of a rate cut before May. Powell acknowledged the risks of moving too quickly, emphasizing the importance of ensuring that positive economic indicators are a true reflection of sustained inflation progress.

Despite Powell's cautious stance, bond traders remain convinced that rate cuts will be implemented later in the year as the post-pandemic inflation surge subsides. However, questions linger about the extent of the central bank's potential actions. Kevin Flanagan, head of fixed income strategy at Wisdom Tree Investments, believes the Fed can deliver three to four rate cuts, but he acknowledges that robust job growth and wage increases in January challenge the narrative of an imminent, aggressive easing by the Fed.

Bond markets reacted to Powell's comments, with Treasury yields rising in Asia as investors reconsidered expectations of rapid rate cuts. The benchmark 10-year yields climbed five basis points to 4.07%, while the Bloomberg Dollar Spot Index strengthened.

The US economy's resilience, defying concerns of a recession after the Fed's rate hikes ceased in July, has continued to expand at a solid pace. The substantial job addition of 353,000 in January, exceeding economists' expectations, fueled a bond market selloff and raised questions about the attractiveness of Treasuries given their lower yields compared to the previous October peaks.

Sally Auld, Chief Investment Officer at JBWere Ltd., noted the difficulty of advocating for Treasury yields at 4%, stating that the economy's strength makes it challenging to support buying at this level. While she initially considered 5% Treasury yields as the cycle peak, the current economic momentum raises doubts about the feasibility of such levels.

Amidst uncertainties about the Fed's timing, some investors find appeal in five-year notes, anticipating a more extended rate-cutting campaign. Priya Misra, Portfolio Manager at J.P. Morgan Asset Management, sees the uncertainty surrounding the Fed's actions increasing the attractiveness of five-year notes, which may benefit from a more prolonged normalization process.

The conviction that the Fed will commence easing policy by mid-year serves as a support level for the bond market. Buyers tend to re-enter the market when yields spike, seeking to capitalize on relatively high payouts before potential rate cuts materialize. Additionally, a substantial $6 trillion in money-market funds could flow into bonds once short-term rates start declining.

While the current economic strength has delayed the urgency for rate cuts, policymakers are cautious about maintaining interest rates at elevated levels for too long. With the rate currently in a band of 5.25% to 5.5%, well above the perceived neutral level, there is room for policy adjustments as inflation recedes.

Fed Chair Powell emphasized a risk management approach, expressing a willingness to welcome a strong labor market as long as inflation continues to decline. Despite Powell's remarks indicating a measured approach, the futures market still prices in about five quarter-point cuts for the year, with some odds on a potential first move in March.

As the market navigates these uncertainties, bonds may find room for a rally. Bruno Braizinha, rates strategist at Bank of America Corp., cautions investors to prepare for the possibility of 10-year Treasury yields falling to 3% this year. Factors such as a reassessment of the Fed's neutral policy rate and unexpected economic shocks could contribute to a lower yield environment.

The evolving dynamics of the US economy, coupled with the Federal Reserve's measured stance, have introduced complexities and uncertainties into bond markets. Bond traders, while still anticipating rate cuts, are adjusting their expectations based on economic data, making the path forward for yields and monetary policy less certain. As market participants navigate this landscape, the potential for bond market rallies and shifts in investor sentiment remains a key consideration in the ongoing economic narrative.

Source: Bloomberg

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Ukadike Micheal

Stocks

Economic

Amidst a tumultuous session, Chinese stocks faced continued volatility following last week's sharp decline. Investors navigated the aftermath as policymakers' reassurances to stabilize the slumping equity market were scrutinized.

In the afternoon, shares staged a partial recovery, responding to the securities regulator's commitment to take preventive measures against risks associated with share pledges. The CSI 300 Index exhibited resilience, rebounding over 1% after an initial dip of 2.1%. However, small-cap shares, while trimming losses, remained in negative territory. Fluctuations Continue in Chinese Stock Market Despite Beijing's Assurance of Stability_1

Fluctuations Continue in Chinese Stock Market Despite Beijing's Assurance of Stability_1

The recent market woes have been fueled by a series of challenges, including a prolonged property downturn, weak economic indicators, and escalating tensions with the United States. A staggering $7 trillion has been wiped off the combined value of Chinese and Hong Kong equities since their peak in early 2021. The ongoing market turmoil has triggered concerns about margin calls and forced liquidation, with shareholders facing the risk of significant losses.

Investors engaged in various trading strategies, with some relying on anticipated support for larger caps, while others implemented trades like long CSI 300 and short CSI 500 and CSI 1000. The latter gauge, often used as the underlying benchmark for derivative products, experienced substantial selling pressure, raising fears of margin calls and forced liquidation.

The China Securities Regulatory Commission attempted to restore confidence by pledging on Sunday to prevent abnormal market fluctuations. The regulator outlined plans to guide more medium- and long-term funds into the market and crack down on illegal activities such as malicious short selling and insider trading. However, the lack of specific details in the announcement left investors seeking a clearer picture of the proposed measures.

The market's response has been mixed, with some viewing the recent turbulence as indicative of a potential market bottom. Despite foreign funds briefly turning net buyers during the morning session, withdrawals resumed in the afternoon, contributing to the overall market uncertainty. The surge in trading volume in specific exchange-traded funds hinted at potential state fund intervention, although historical trends suggest such purchases may lack enduring impact.

As investors grapple with the evolving situation, opinions vary on whether the current market conditions signal a bottom or if further declines are on the horizon. Government think tank academic Liu Yuhui proposed the establishment of a stock stabilization fund to bolster market confidence, aiming for a substantial size of 10 trillion yuan or more.

Amid rising frustration, thousands turned to a social media platform associated with the US embassy in Beijing to voice grievances over the economy and sliding share prices. This move highlighted the limited avenues available for Chinese internet users to express concerns about economic issues or government performance.

While uncertainty prevails, some market observers remain cautiously optimistic, suggesting that policymakers are signaling a reluctance to witness further declines. As the situation unfolds, the market's trajectory and the effectiveness of proposed measures will become clearer, determining whether the current turbulence indeed marks a turning point for Chinese equities.

Source: Bloomberg

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Cohen

Cryptocurrency

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