Strong Risk Appetite Amid Speculation of Fed’s Rate Hike Cycle Ending and China’s Stamp Tax Cut

The possibility of the Federal Reserve’s rate hike cycle coming to an end and the Chinese government’s reduction of stamp tax on stock trading are contributing to a strong risk appetite in the new week.

Fed Chairman Powell, on Friday, stated that they are ready to further raise interest rates if it is appropriate, emphasizing their intention to keep their policy at a restrictive level until they are confident that inflation will move sustainably towards their target.

Powell highlighted that annual core consumer inflation is still high, and there is much progress to be made to return to price stability.

He noted that additional evidence of growth consistently exceeding trends could jeopardize progress in inflation and may require further policy tightening.

Powell stated that they will be cautious when deciding whether to tighten further or keep the policy rate steady and wait for future data, highlighting that a sustainable period of strong labor market conditions will require price stability, and they will continue until the job is done.

Analysts emphasized the importance of the employment data to be released this week, expecting signals from the non-farm payrolls data to have a significant impact on market direction following Powell’s statements.

Meanwhile, after ending its four-week downward trend, the price of gold balanced at $1,916, while Brent crude oil started the week with a 0.2% decrease at $84.05 per barrel.

With these developments, on Friday, the Dow Jones index in New York gained 0.73%, the S&P 500 index gained 0.67%, and the Nasdaq index gained 0.94%. US index futures also started the new week with gains.

In European markets, a predominantly bullish trend was observed on Friday, with European Central Bank (ECB) President Christine Lagarde emphasizing the 2% inflation target in her speech at Jackson Hole.

Lagarde stated that they will continue a tight monetary policy until inflation reaches the 2% target, and they will continue to closely monitor wage increases.

On Friday, the FTSE 100 index in the UK gained 0.07%, the FTSE MIB 30 index in Italy gained 0.49%, the DAX 40 index in Germany gained 0.07%, and the CAC 40 index in France gained 0.21%. European index futures also started the new week with gains, and the markets are closed in the UK today.

Positive sentiment influenced the Asian markets with China’s influence in the region, as the Chinese government continues to take supportive measures for the economy and markets.

The government recently announced a reduction in the stamp tax rate for stock markets, with analysts noting that this was last done in 2008.

On the other hand, after approximately 2 years of suspension, shares of the real estate company Evergrande plummeted by 87%, and the construction sector continues to remain in focus for investors.

Near the closing, Japan’s Nikkei 225 index gained 1.7%, Hong Kong’s Hang Seng index gained 1.5%, China’s Shanghai Composite index gained 1.7%, and South Korea’s Kospi index gained 0.8%.

In the domestic market, the BIST 100 index in Borsa Istanbul closed the day with a 3% gain at 7,716.67 points on Friday.

After closing at 26.3550 with a 2.2% increase on Friday, the USD/TRY is trading at 26.5080 at the opening of the interbank market today.

Analysts pointed out that the domestic data agenda is quiet today, while in the foreign markets, the Dallas Fed manufacturing business index data will be monitored in the US. From a technical perspective, they noted that the BIST 100 index has resistance at 7,800 and 7,920 levels, while support is at 7,700 and 7,500 points.