Financial market research and analysis

Terrorism, political and geopolitical problems flooded the headlines globally. Rising tensions between the US and China, terrorism and carnage in Europe keep the global sentiment contained, although the market reaction remains under control.

Chinese stocks are under the pressure of increasing Chinese rates. The economy is believed to be overheating under the table, given that the Yuan appreciation and capital outflows are slowly, but surely, biting into the financial system. Hang Seng (-0.47%) and Shanghai’s Composite (-0.49%) remain offered.

The FTSE opened downbeat, as mining (-0.74%) and energy stocks (-0.15%) sold off at the London open. Soft oil and commodity priced could give a hand to the bears for a further slide, while the overall mood is turning sluggish.

The DAX (+0.10%) passed through the Berlin attack at Frankfurt open. The euro depreciation appears to be the major driver in German stock markets. Producer prices in Germany rose 0.3% on month to November.

Muted US open expected

US equity futures remained marginally bid.

Dow Jones futures (+0.02%), S&P 500 futures (+0.22%)

The Dow is called 13 points higher at the US open; the S&P 500 is expected 3 points firmer.

Fading rally in the global stock markets could prevent the US stocks from renewing record before the year-end.

Turkey has no choice but to raise rates

The Central bank of Turkey (CBT) meets today and is expected to raise the overnight lending rate by additional 25 basis points amid sharp depreciation in the Turkish lira. The sell-off waves in the lira tend to be aggressive given the relatively low lira rates.

The CBT’s loose monetary policy is believed to be a result of high political pressure. President Recep Tayyip Erdogan is known for his aggressive push for lower rates to revive the economic recovery. Nevertheless, investors are not convinced by the current lira rates, which do not cover for Turkey’s political and geopolitical risks, nor the lingering risks of further lira depreciation.

Downside risks prevail due to political pressure. President Erdogan has called for lower rates two weeks after the CBT raised the lending rate by 25 basis points at last month’s MPC meeting. As a knee-jerk reaction, the USDTRY had soared to the fresh historical high of 3.5941; the EURTRY had rallied to 3.8273.

Investors have no more tolerance for loose TRY policies. Should the CBT remain on hold, the lira is poised to renew record against the US dollar and the euro.