Live Markets: Turkish stocks: the unlikely inflation shelter

SASA Polyester Sanayi

22/12/2022 13:47

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      STOXX 600 down 0.3%
    

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      Energy, banks provide support
    

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      UK Q3 GDP shrinks by 0.3%
    

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      U.S. stock futures lower
    

  
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        TURKISH STOCKS: THE UNLIKELY INFLATION SHELTER (1346
GMT)
  
    Inflation has been a dominant force this year across markets
and finding assets offering protection against soaring prices
has been quite a struggle for investors. 
    There's one place, though, that has given good shelter: the
Istanbul stock market - and that's pretty surprising given the
financial turmoil through which Turkey has been going through.
    In a year where the inflation rate there has crossed 85%,
the BIST 100  .XU100  has managed to rise over 190%, breaking
one record after the other. But even in U.S. dollar terms it is
up 110%. Now the Turkish equity index is worth $73 billion. 
    Turkish Airlines  THYAO.IS  has gained more than 610%,
polyester producer SASA  SASA.IS  is up 370% and bank Turkiye IS
Bankasi  ISCTR.IS  has rallied 294% - just to name the best
three performers among the country's heavyweight stocks.    
    (Danilo Masoni)
    *****
    YEN FOR YEAR-END FUN (1141 GMT)
    The last days of the year can often be quite dull, but the
yen is providing some excitement this time.
    Some analysts say the Bank of Japan's decision to tweak its
bond-yield control policy could boost the Japanese currency even
further in the next few days.
    "Positioning liquidation risks as year-end approaches could
see further notable declines in USD/JPY into the high 120's,"
says Derek Halpenny, head of research, global markets Emea &
international securities at MUFG Bank.
    "In the short term, given the light positioning by
investors, the JPY will continue to strengthen," Gareth
Gettinby, multi-asset investment manager at Aegon AM, says.
    A potential end to BoJ's ultra-loose monetary policy, along
with lower U.S. yields and a global recession, "will see the
Japanese yen regain its safe-haven status," he adds.
    The yen firmed on Thursday, returning towards a four-month
peak against the dollar hit this week. It's set for a gain of
nearly 9% in this final three months of the year - its strongest
quarterly performance against the dollar since Q4 2008.
    (Stefano Rebaudo)
    *****
    AND THE WINNER IS... ENERGY! (1107 GMT)    
    The year's few last trading sessions are unlikely to
materially change the picture of 2022 performances across
European sectors and with that in mind it's safe to declare
energy  .SXEP  the absolute winner, up 27%. 
    At a little distance come aerospace and defence  .SXPARO 
set to bag a +15% gain, while financials and insurers  .SXIP 
should manage break even. Banks  .SX7P  are winners only on
relative terms, given the sector is down nearly 3% - but still
showing a 9 percentage point outperformance versus the STOXX,
down almost 13% YTD.
    And now comes the long list of heavy losers. Real estate
 .SX86P  has shed 40% of its market value over the last 12
months and retail  .SXRP  follows next with drop of more than
30%. Tech  .SX8P  too has nothing to cheer about, with a 25%
plunge.    
    (Danilo Masoni)
    *****
        UK Q3 GDP: BUSINESS INVESTMENT, INVENTORIES AND SAVINGS
RATIO IN FOCUS (1039 GMT)
    A downward revision to the UK's third quarter GDP data
raises the risk of a downturn, but Q4 figures will be key as to
whether 2022 gets the 'recession' label, say economists at
Investec.
    "If it does escape the recession label, which still looks
possible but harder owing to revisions, this would purely be in
the technical sense, with weaker momentum in the UK economy
still abundantly clear," they write in a note. 
    Britain's economy contracted more than first thought in the
third quarter of this year, with economic output down by 0.3% in
quarterly terms compared with a previous estimate of -0.2%.
    But Investec is not just interested in the headline figure,
and takes a look at business investment, inventory levels and
the savings ratio.
    Business investment in Q3 fell 2.5% from Q3 and remains more
than 8% below pre-pandemic levels. 
    "With such subdued business investment, efforts to boost
labour productivity and accordingly sustained economic growth
look to be constrained," they wrote in a note.
    One trend they see as deflationary is falling inventory
volumes, down £5.2bn in Q3 - the first decline in their level
since prior to the pandemic. 
    "Considering the clear slowing in economic momentum and
weakness in the consumer environment, we expect firms to cut
prices next year to further reduce some of this stock, helping
to constrain overall inflationary pressures," they write. 
    Meanwhile, the savings ratio got a 6.7% boost in Q2 to 9.0%
in Q3 - but don't get too excited. The economists put this down
to soaring yields in the aftermath of Kwarteng's 'mini-Budget',
without which the saving ratio would have been a much smaller
0.5%.
    Next year will be a difficult one, with recession on the
horizon, but there is more optimism going into 2024.
    "...when combined with an expected decline in inflation, we 
believe the door will be open to cut rates in the UK towards the
back end of 2023  to support the economy, helping economic
momentum rebound in 2024," the note concludes.
    (Lucy Raitano)
    *****
        STOXX UP, BANKS ON A HIGH (0929 GMT)
  
        European shares have opened on the good foot, sending
the STOXX 600  .STOXX  up around 0.4% in early deals and
squeezing the euro STOXX volatility index  .V2TX  to fresh
January lows as a festive vibe spreads through thinly staffed
markets.
  
        But the real stand out gainers are banks - the only
sector that is managing to break new ground, likely still
benefiting from the European Central Bank's ultra-hawkish
performance last week which is lifting bond yields to new highs.
  
        The STOXX Banks  .SX7P  lifted around 0.7% to its
highest since March and on set for a fifth consecutive day of
gains. Energy  .SXEP , by far the best performers this year, is
the top sectoral gainer, up 1.1%, but remains below last month's
peak.
  
        Here's the banks' high, and below your opening snapshot:
   
        (Danilo Masoni)
  
        ****** 
  
        EUROPE IN RECOVERY MODE (0738 GMT)
    It seems investors are looking to finish 2022 on a festive
tone with stock futures for Europe pointing to another day of
recovery after an overdose of central bank hawkishness.
    Supported by a strong Asian session, EuroSTOXX50 and FTSE
futures were up 0.3%, while U.S. contracts pointed to mild gains
on Wall Street too, building onto Wednesday's rally driven by
strong Fedex and Nike earnings and improving consumer sentiment.
  
    The pan-European STOXX 600  .STOXX  index is down 11.6% so
far in 2022 and down 2% this month but on Wednesday it clocked
its biggest one-day jump since early November, as a local gauge
of equity volatility fell to its lowest in 11 months.    
        (Danilo Masoni)
  
        *****    
  
    SANTA MAKES A BRIEF STOP (0658 GMT)    
    Markets are attempting a brief Santa rally ahead of
Christmas as traders wind down for the year, with a rebound in
U.S. consumer confidence providing the fillip, while the yen
charges on after the Bank of Japan bombshell earlier this week.
    The Japanese currency  JPY=EBS  is hovering close to 131 per
dollar, a far cry from the 32-year low of 151.94 it touched in
October, with some analysts expecting the yen to appreciate
further. There are others, however, such as Goldman Sachs who
expect the dollar to fight back.
    The risk-on sentiment meant shares in Asia  .MIAPJ0000PUS 
tracked Wall Street and rose 1.3%, while the dollar  =USD  was
on the back foot, helping to pull up gold prices  XAU= .  
    In holiday-curtailed trading, investors will turn their
attention to Britain's Q3 GDP data which comes out on Thursday.
Economists polled by Reuters expect it to rise 2.4% year over
year.
    Meanwhile, China's securities watchdog said the world's
second biggest economy will recover as strong stimulus policies
take effect, even as it grapples with soaring COVID-19 cases
after the country began dismantling its "zero-COVID" stance. 
    In the crypto world, the FTX saga flips to a new page as
founder Sam Bankman-Fried was on his way to the United States to
face fraud charges.    
    Key developments that could influence markets on Thursday:
    Economic events: UK Q3 GDP data, Sweden PPI data for
November
    (Ankur Banerjee)
    *****
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