Data showing that consumer inflation in the US continued to follow a moderate course increased interest in riskier assets in global markets. However, uncertainty in the Middle East, tensions around the Strait of Hormuz and developments related to the Russia-Ukraine war led investors to act cautiously.
In the US, the Consumer Price Index (CPI) rose 0.1% month on month and 3.4% year on year in July. The data, which came in line with expectations, showed that annual inflation fell to its lowest level in the past four months. Core inflation stood at 2.5%, its lowest level since February.
Energy prices continued to decline, although at a slower pace than in June. Analysts said the data indicated that the slowdown in inflation had regained momentum and weakened expectations of interest rate hikes by the Federal Reserve.
In money markets, the probability of a Fed rate hike in September fell below 50%. Expectations of a rate hike by the end of the year also weakened compared with the previous period.
Statements from the parties on the Strait of Hormuz being monitored
Pakistani government sources said the US and Iran had agreed to extend the 60-day ceasefire under the Islamabad Accord, which expires on August 17. The parties conveyed their approval to mediators, while contacts over the length of the extension continued.
US President Donald Trump said the United States had “full control” over the Strait of Hormuz. Trump used harsh language regarding Iran’s military capacity and economic situation, arguing that Tehran could not take action concerning the strait.
The Iranian administration also said its conditions had to be accepted for the Strait of Hormuz to be reopened. Oil prices and US Treasury yields saw limited declines following the statements.
US technology stocks rise
Results announced during the earnings season in the US remained a focus for investors. Financial results pointing to strong demand for artificial intelligence infrastructure supported technology stocks.
Shares of cloud computing company CoreWeave gained 19.3% after its second-quarter revenue nearly doubled from the same period last year. Super Micro Computer shares also rose 19.02% on financial results that exceeded expectations.
Among artificial intelligence-related companies, Nvidia shares rose 3%, Micron Technology shares gained 4.9% and Oracle shares increased 5.4%. The S&P 500 rose 0.26% and the Nasdaq gained 0.54%, while the Dow Jones index was flat.
The yield on the US 10-year Treasury note fell 2 basis points to 4.68%. The dollar index rose 0.1% to 99.9; after exceeding 100 during the day, the index started the new session at 100, up 0.1%.
A stronger dollar and elevated Treasury yields weighed on gold prices. Spot gold fell 0.3% to $4,394 an ounce, while October-dated Brent crude declined 0.3% to $88.7 a barrel.
Geopolitical pressure increases in European markets
Major European indices, except those in Italy, declined. Uncertainty in the Middle East, rising tensions between Russia and Ukraine and the failure of the decline in energy costs to meet expectations strengthened risk aversion in the region.
Annual inflation in Germany rose to 2.8% in July, driven by higher energy prices. Money markets priced in an approximately 80% probability that the European Central Bank could raise interest rates in September.
Ukraine’s Security Service said that two Russian naval frigates and a patrol boat were targeted in an attack on the Novorossiysk Naval Base in Russia. Russian Foreign Ministry spokesperson Maria Zakharova, meanwhile, argued that Ukraine’s actions in the Sea of Azov and the Black Sea threatened global food security.
The FTSE 100 in the UK fell 0.1%, France’s CAC 40 declined 0.46% and Germany’s DAX 40 lost 0.23%. Italy’s FTSE MIB 30 was flat.
Positive trend in Asian stock markets
Asian markets followed a buying-oriented course. The moderate outlook for US inflation and weaker hawkish expectations regarding the Fed supported regional stock markets.
In Japan, producer inflation was 0.1% month on month and 7.2% year on year in July. Annual PPI came in below expectations but accelerated from the previous month.
Concerns that the yen’s depreciation would raise prices brought support for a Bank of Japan rate hike back into focus. Money markets priced in a 75% probability that the bank would raise its policy rate by 25 basis points next month.
Near the close, the Nikkei 225 rose 1.6%, the Kospi gained 4%, the Shanghai Composite increased 0.5% and the Hang Seng rose 0.1%.
BIST 100 moves above 14,000 points
The BIST 100 index at Borsa Istanbul gained 2.96% to finish the day at 14,110.14 points, supported by increased global risk appetite. The index thus posted its strongest daily performance since June 15 and moved above the 14,000-point level.
The August futures contract based on the BIST 30 index rose 0.37% in the evening session compared with the regular-session close. The dollar/Turkish lira traded at 47.7740, just above the previous close.
In Türkiye, the Central Bank of the Republic of Türkiye’s briefing on its third Inflation Report of the year and current account balance data will be monitored. Economists expect the current account to post a deficit of $4.9182 billion in June and $52.391 billion for the year as a whole.
The UK’s second-quarter growth, industrial production and foreign trade balance; Türkiye’s June current account balance, July home sales and weekly monetary and banking statistics; eurozone industrial production; and the US July Producer Price Index and weekly jobless claims are on the day’s data agenda.
