Artificial intelligence volatility in global markets and CBRT interest rate expectations

Global markets ended the week mixed under the influence of US inflation data, geopolitical risks in the Middle East, and fluctuations in the artificial intelligence sector; domestically, investors are awaiting the CBRT's interest rate decision on Thursday.

As annual inflation in the US rose to a 4-month peak due to increasing energy costs, the possibility of the Fed proceeding with a rate hike gained strength. Emphasis by Fed officials on restrictive monetary policy and concerns that high interest rates would negatively impact artificial intelligence investments triggered sharp sell-offs in technology stocks. While China's CXMT making progress in chip manufacturing heightened competition concerns, the Nasdaq fell by 4.48 percent and the S&P 500 by 1.95 percent on a weekly basis, whereas the Dow Jones rose by 0.67 percent.

European stock exchanges closed the week in positive territory supported by corporate balance sheets and energy and defense purchases; the FTSE 100 in the UK gained 3.09 percent and the DAX in Germany gained 2.14 percent. In the Asian market, South Korea's technology-heavy Kospi index plummeted by 14.46 percent due to the melt-down in tech stocks, experiencing its sharpest weekly loss in 18 years. In China, inflation data coming in below expectations pointed to weak domestic demand.

Domestically, Borsa İstanbul's BIST 100 index dropped 4.44 percent weekly to 11,721.72 points, while Dollar/TL closed the week at the 49.5140 level. While Treasury and Finance Minister Mehmet Şimşek announced that legal regulations to combat capital market crimes will be completed by the beginning of 2027, CBRT Governor Fatih Karahan emphasized that domestic residents' interest in TRY assets continues. The most important domestic agenda item of the week will be Thursday's CBRT interest rate decision, where economists expect the policy rate to be cut by 100 basis points down to 36 percent.