Data released in the United States indicating a slowdown in consumer price increases supported risk appetite in global markets. Uncertainty in the Middle East, tensions around the Strait of Hormuz and developments related to the Russia-Ukraine war, however, kept markets cautious.
In the United States, the Consumer Price Index (CPI) rose 0.1% month on month and 3.4% year on year in July. The figures were in line with market expectations, while annual inflation fell to its lowest level in the past four months and core inflation reached 2.5%, its lowest level since February.
Although the decline in energy prices slowed compared with June, the downward trend continued. Analysts assessed that the data pointed to renewed strength in the slowdown in inflation and weakened expectations for interest-rate increases by the US Federal Reserve.
In money markets, the probability of a Fed rate increase in September fell below 50%. Expectations of a rate increase by the end of the year also weakened compared with the previous period.
Uncertainty continues around the Strait of Hormuz
Pakistani government sources said the United States and Iran had agreed to extend the 60-day ceasefire under the Islamabad Accord, which is due to expire on August 17. The parties conveyed their approval to the mediators, while discussions continued over the duration of the extension.
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 the country's economic situation, arguing that Tehran could not take action concerning the strait.
The Iranian administration said its own conditions must be accepted for the Strait of Hormuz to be reopened. Following these developments, oil prices and US Treasury yields saw limited declines.
US technology stocks rise
Corporate results released during the earnings season in the United States remained in focus for investors, while financial results pointing to strong demand for artificial intelligence infrastructure supported technology stocks.
Shares of cloud computing company CoreWeave rose 19.3% after its second-quarter revenue nearly doubled from the same period last year. Super Micro Computer shares also gained 19.02% after financial results exceeded expectations.
Shares of artificial intelligence-linked companies Nvidia, Micron Technology and Oracle rose 3%, 4.9% and 5.4%, respectively. The S&P 500 rose 0.26%, 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, surpassing 100 during the day, and began the new day at 100, up 0.1%.
Gold fell 0.3% to $4,394 per ounce amid the stronger dollar and elevated Treasury yields. October-dated Brent crude also fell 0.3% to $88.7 per barrel.
Geopolitical pressure on European stock markets
European stock markets moved lower except in Italy. Uncertainty in the Middle East, rising tensions between Russia and Ukraine and the failure of energy costs to decline as much as hoped increased risk perceptions in the region.
Annual inflation in Germany rose to 2.8% in July, driven by higher energy prices. Money markets priced in an 80% probability that the European Central Bank could raise interest rates in September.
Ukraine's Security Service said two frigates and a patrol boat belonging to the Russian navy were targeted in an attack on the Novorossiysk Naval Base in Russia. Russian Foreign Ministry spokesperson Maria Zakharova argued that Ukraine's actions in the Sea of Azov and the Black Sea threatened global food security.
The FTSE 100 in the United Kingdom fell 0.1%, France's CAC 40 declined 0.46% and Germany's DAX 40 dropped 0.23%. Italy's FTSE MIB 30 was flat.
Asian markets rise
Asian stock markets mostly moved higher. The moderate outlook for US inflation and weakening expectations for a more hawkish Fed supported markets in the region.
Producer inflation in Japan was 0.1% month on month and 7.2% year on year in July. Although annual PPI came in below expectations, it accelerated from the previous month.
Amid concerns that the yen's depreciation was driving up prices in Japan, support for an interest-rate increase by the central bank was assessed as possible. Money markets priced in a 75% probability that the Bank of Japan 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%.
Domestic markets focus on economic data
The BIST 100 index on Borsa Istanbul gained 2.96% to close at 14,110.14. The index recorded its strongest daily performance since June 15, surpassing the 14,000-point level.
The August 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 deficit to reach $4.9182 billion in June and $52.391 billion for the year as a whole.
The day's data agenda includes the United Kingdom's second-quarter growth, industrial production and foreign trade balance; Türkiye's June current-account balance, July housing sales and weekly monetary and banking statistics; eurozone industrial production; and the United States' July Producer Price Index and weekly initial jobless claims.
