MORNING Report: Global Risk Appetite Weakens as Türkiye Gets Supportive Inflation Signals

Summary:

Global markets opened the week under pressure as risk appetite weakened, driven by uncertainty around the next Federal Reserve chair and rising bond yields in Japan and the United States. In contrast, Türkiye’s markets ended the previous session on a positive note, boosted by favourable early inflation signals from Istanbul Chamber of Commerce (ITO) data and expectations of a rate cut at next week’s CBRT meeting. The BIST 100 rallied, the lira strengthened modestly, and Türkiye’s CDS premium fell to a five-year low.

Early Inflation Indicators Lift Sentiment in Türkiye

Turkish financial markets began the week with a strong bid, supported by ITO’s November inflation data.
The index rose 1.19% month-on-month, bringing the annual inflation rate down to 38.28%.

The moderate 1.28% rise in food and non-alcoholic beverages—typically a volatile category—was viewed as especially constructive.
This followed concerns triggered by Türk-İş’s Ankara food inflation estimate of nearly 5%, reported a day earlier.

The softer ITO data strengthened expectations that TÜİK’s official inflation reading, due Tuesday, could come in around 1.2%, possibly even slightly below consensus.

Rate-Cut Expectations Boost BIST and the Lira

With inflation indicators improving, market pricing for a 150 bps rate cut at the December 11 CBRT meeting increased significantly.

This shift helped drive:

• BIST 100 up 2%,

• Banking Index up 3.4%,

• Bond purchases across the curve,

• A modest pullback in USD/TRY from 42.52 to near 42.43.

Türkiye’s five-year CDS fell further to 236 bps, touching its lowest level in five years.

Mixed Growth Signal: Strong Construction, Weak Agriculture

TÜİK’s GDP data showed Türkiye’s economy grew 3.7% year-on-year in Q3 and 1.1% quarter-on-quarter.

Sector breakdown:

• Construction: +13.9%

• Multiple service and industrial segments: strong gains

• Agriculture: –12.7% — sharp negative divergence

Meanwhile, Istanbul Chamber of Industry’s PMI rose to 48, the highest since February, though remaining below the 50 threshold for a 20th consecutive month.
Textiles showed the steepest decline across sub-sectors, while electrical and electronics equipment performed best.

Türkiye’s Demographic Risks Deepen

Newly released TÜİK figures highlighted ongoing demographic deterioration.
In the first seven months of the year:

• Births fell 8.3%,

• Deaths rose 0.7%.

The data confirms that Türkiye’s population is rapidly losing its replacement capacity, raising long-term economic and social risks.

Global Markets Start the Week on a Weak Note

Outside Türkiye, global markets opened the week in a risk-off mood.

The key driver was Kevin Hassett, now seen as the leading candidate for Fed chair.
Hassett is associated with large and rapid rate cuts—an outlook that unsettled investors.

The expectation of aggressive easing also contributed to:

• Persistent volatility in US markets

• Sharp movements in commodities

• A further rally in safe-haven assets

Gold set another all-time high last week, while silver surged toward $59, its strongest level on record. Analysts see potential short-term spikes toward $62–63, though underlying momentum suggests higher levels may follow.

Cryptocurrencies Face Heavy Selling Pressure

The crypto market remained under strain following heavy losses in November.

• Bitcoin fell more than 5% on Monday, marking its steepest one-day drop in a month.

• From its early-October peak near $125,000, Bitcoin has lost roughly one-third of its value.

• Ether slid more than 8%.

• MicroStrategy cut its 2025 earnings outlook due to Bitcoin weakness.

• S&P’s downgrade of Tether added to concerns.

• The total crypto market has shed nearly $1 trillion in value in recent weeks.

Risk appetite also softened across tech stocks, mirroring crypto volatility.

US Data Strengthens Expectations of a December Fed Cut

US manufacturing contracted for a ninth month, while strong online retail spending supported expectations for continued consumption resilience.

Futures now assign an 86% probability to a 25 bps Fed rate cut at the Dec. 10 meeting.

US equities ended Monday lower, while Asia-Pacific markets traded mixed early Tuesday as bond yields rose and crypto markets destabilized sentiment.

BoJ Rate-Hike Risk Shakes Global Bonds

Expectations that the Bank of Japan may raise interest rates this month triggered sharp selling in Japanese government bonds.

• The 10-year JGB yield rose to 1.88%, the highest since 2007.

• US 10-year yields climbed to 4.08%.

The rapid rise in Japanese yields threatens global yen-funded carry trades, a key pillar of global liquidity.
The yen, which weakened to 158 per dollar last week, recovered toward 155.

Oil prices also inched upward amid rising geopolitical tensions and renewed concerns over Russian energy infrastructure.

By Emre Degirmencioglu, Kıbrıs İktisat Bankası

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