The Federal Reserve’s 50 basis point rate cut last week has created expectations for a rally in stock markets. However, this should be evaluated carefully depending on the results of the upcoming earnings season. Historically, such large rate cuts by the Fed have occurred during recessions or crises. This time, it appears that the Fed’s aim is to reduce the risk of a recession and support the economy. This could have a positive effect on stocks. Considering the S&P 500’s 12-month returns and 15% declines, many declines in the past have been associated with recessions. However, the decline in 2022 was triggered by rate hikes, which requires a different analysis. In 1947, GDP fell while unemployment decreased, so this period was not considered a recession. In 1962, there was a sudden crash during a period of continued growth. As a result, the support the Fed has given to the markets may allow stocks to reach new highs in the future. The 1962 example shows that stocks can recover significantly in such situations.
The US economy grew by 3 percent in the second quarter of this year. The US economy grew by 3 percent in the second quarter of the year, in line with estimates. The US Department of Commerce announced the final estimates for gross domestic product (GDP) data for the April-June period. Accordingly, GDP in the US grew by 3 percent on an annualized basis in the second quarter of this year. US Treasury Secretary Yellen emphasized the importance of regulations in strengthening the financial system. US Treasury Secretary Janet Yellen stated that a resilient financial system is critical to a strong economy and said that strengthening the system requires insisting on well-thought-out regulations.
Chinese stocks may finally achieve a sustainable increase. The major incentives provided by policymakers to the economy are providing the support that markets need. While the easing of credit restrictions in the housing market and interest rate cuts are expected, the most striking development is the direct support provided to stock markets. The ability of funds to buy stocks using PBOC funds will provide significant support to struggling markets and demonstrate policymakers’ determination to halt the decline. M&A incentives may also boost investor confidence. However, the impact of these measures on inflation and the extent to which they will support consumption are uncertain. The results may take time to appear, but the increase in sentiment and expectations in the markets is critical.
The People's Bank of China has reduced the required reserve ratios of banks and credit institutions. The People's Bank of China (PBoC) announced that it has reduced the required reserve ratios of banks and credit institutions by 50 basis points. The Central Bank, which has taken measures to stimulate the economy, also emphasized that it may reduce the required reserve ratios by an additional 25 to 50 basis points during the year depending on the liquidity situation in the market.
Let me state that personal income and spending in the US, the University of Michigan consumer confidence index, the economic confidence index in the Euro Zone, industrial profits in China, and the Tokyo CPI in Japan will be monitored today.
The EURUSD parity is trading at $1.1162 this morning. As we end a week with a busy macroeconomic agenda, all eyes will be on PCE data today. When we evaluate the euro-dollar parity, I would like to emphasize that I have observed a 1.06% increase since the beginning of September, and the euro's increase against the dollar has been 5.66% in the last one-year period. If the peak level of 1.1214 is exceeded above, we may see a trend towards the level of 1.1275. In case of possible pullbacks, I will be following the support points of 1.1159 and 1.1083 for now.
The ounce of gold is trading at $2666.00 this morning. While the ounce of gold has increased by 6.49% as of September, when this rate is evaluated since the beginning of the year, it is seen that it has been realized at 29.21%. The record level on the precious metal front was moved to $2685.61. If the desire for an increase continues, the resistance levels of $2700 - 2725 - 2740 may stand out above. In case of possible pullbacks, if there is a drop below the $2660 level, the $2610 support may come to the fore.
Yesterday, I followed the growth figures on the data calendar. The US economy grew by 3 percent in the second quarter of this year. The US economy grew in line with the estimates with 3 percent in the second quarter of the year. On today's agenda is the PCE data that the Fed is particularly following as we complete the week. The median of analyst estimates in the Bloomberg survey is that PCE inflation will slow to 2.3% annually in August.
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