Global Outlook
*F.E.D. kept the interest rates same level within 0,25 to
0,50 in March meeting too. Committee stressed the points that household
spending has been increasing although fixed business investments and net export
level is still weak. Shortfall between actual inflation and expected inflation
level 2% is still soft spot of economic indicators. Because of that committee
prefer to act gingerly in interest rate decisions (1). US economy added 215.000
jobs in March little less than previous month does. So, Unemployment rate has
risen 5,0 % from 4,9 % which was lowest point of last eight year(2). Although financial
markets have almost priced out the likelihood of a rate rise at the Fed's June
policy meeting, the probability has risen to 74 % to be keeping its available
level (3). The table of estimated FOMC interest rate probabilities according to
possible rates by Chicago Mercantile Exchange is given below.
Table 1: CME, 2016
*It started to hear good news from China. PMI data
(purchasing manager index) has perform best performance in recent nine months
with 50,2 in March. (A reading above 50 indicates expansion, while a reading
below 50 reflects economic shrinkage) Real estate investments have risen up 3 %
in the first two months of 2016 while third and fourth tier cities have
performed strong sales efforts. On the other side it is still early to say an
imminent stable recovery in economy (4).
*European side, unemployment rate in February
flows the market as 10,3%, lowest rate in Eurozone since August 2011 (5). All
interest rate has been revised downward at March meeting of European Central Bank;
refinancing operations has been decreased by 5 basis points to 0,0%, interest
rates on marginal lending facility has been decreased by 5 basis points to
0,25%, interest rate on the deposit facility will be decreased by 10 basis
points to -0.40%. To top it all, the monthly purchases under the asset purchase
program will be expanded to €80 billion starting in April (6).
The euro area (EA19) includes
Belgium, Germany, Estonia, Ireland, Greece, Spain, France, Italy, Cyprus,
Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Austria, Portugal,
Slovenia, Slovakia and Finland.
The European Union (EU28)
includes Belgium, Bulgaria, the Czech Republic, Denmark, Germany, Estonia,
Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania,
Luxembourg, Hungary, Malta, the Netherlands, Austria, Poland, Portugal,
Romania, Slovenia, Slovakia, Finland, Sweden and the United Kingdom.
*There will be held an referendum in UK within 23 June
Thursday and officially declared that the question about UK exit from European
union will be asked to citizens as: "Should the United Kingdom remain a
member of the European Union or leave the European Union?". The referendum
is getting tough for European Union and it seems that possible brexit can lead
an onset of a perfect storm. Sterling has been valued at the lowest levels
against dollar since the start of 2056 with the fear of Brexit and all polls
shows that majority of citizens will vote for leave from EU. I personally voted
on 5 of April poll of independent and results shows below.
Picture 1: Independent,
05.03.2016
*Russia is stuck in financial problems because of persistently
low oil and derivatives prices. Finance minister wants to push additional
taxation to local oil industry to support government budget not preferring to
cut government expenditures. On the other hand price levels is going up and
real income of household is going down. Although the financial oppression on
citizens getting higher, surprisingly people still overwhelmingly support
Putin. Michael Birnbaum by Washington Post indicated that “when you ask someone
whether they approve of Putin, that’s like asking them whether they approve of
Russia. Who’s going to say no?” (8).
Local Outlook
*If one word requires describing Turkey’s economic condition
in recent months would be “uncertainty”. Everybody has though that election at
2015 will raise dark clouds. Stability and trust will show up for citizens for
local and international investors. Unfortunately mentality did not overlap with
reality. Terrorism stuck Turkey’s territory. Five bombings have taken place in
as many months, in Ankara and Istanbul (9). Global investment climate to Turkey
is worsening and so confidence in Turkey diminishing. On the other hand, its
strategic location crossroads of Europe, Asia and Middle East, young population
nature (42,3 percent of the the population is under 24 years old) is still one
of the most attractive investment location(10).
Automotive Market Outlook
*According to recent survey, changing consumer preferences,
tightening regulation, and technological breakthroughs have important effects
on future automotive market. Big city populations are getting increase at
higher rate than any other. Traffic is grueling day by day. So, Dense urban
environment discourage private car usage. So, we can say that type of city will
become key indicator for future automotive market. We can enumerate future
expected developments able to change automotive market in near future (7):
*Shared mobility and connectivity services,
*Customer Segmentations according to city types,
*Solving of technological and regulatory issues,
*Widespread use of electrified cars
*Computerization changing the mechanical nature of cars
First quarter of 2016, Turkish local automotive market has
shrunk 2,75 % compared to same term of 2015. Expected interest rate increase of
FED, economic developments in China economy, ongoing liquidation operations led
by European Central Bank, geopolitical risks, monetary politics of Central Bank
of Turkey will be main indicator of market along 2016. According to Union of
Automotive Industry Distributors, it is expected to come to live of 2016 Sales
around 900k-950k (13).
Global automobile suppliers market has positive outlook about
2016. Market’s utilization rates increased by 5 % through 85 % in 2015.
Finished goods inventory level has declined to 34 % from 51 % with better
solution in supply chain management.
Commodity Prices
Oil: After hovering around 30$ level for three months, Brent oil
prices headed up to 40$ level within March. Some investor keeps their position
as predicting brent oil prices will be 50$ too fast and too soon. On the other
hand, short time later from hovering around 40 USD, the price level decreases
(11).
(Bloomberg, 05.04.2016)
Copper: Economists use copper as one of the main economic indicator
for several years. Relatively inexpensive and abundant nature with resistant to
corrosion and effective conductor specifications makes it most prevalent raw
material used is especially in emerging market economies relied on
manufacturing industry. The decline trend in price of copper indicates a
slowing in emerging market economies. The one year price level graph below show
us a constant decline in price level from 280 USD/Ibs to 198 USD/Ibs within the
end of 2015. We see a small positive movement within 2016 through 222,45 USD/Ibs
(12).
(Bloomberg,
05.04.2016)
Steel: Similar to copper, Steel is also one of the main raw
materials of construction and durable goods. But, overcapacity of steel
industry and high transportation cost make steel prices locally differs
although contract of this commodity are sold in London Metal Exchange on the
basis of cash settlement. There are too many kind of steel from HRC to rebar.
Because of this reason we will not put a graph in there. But, Steel prices are
also declining all around the world because of slowing down consumer goods and
construction industry (13).
References
1. http://www.federalreserve.gov/newsevents/press/monetary/20160316a.htm
2. http://www.bbc.com/news/business-35944942
3. http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
4. http://www.chinadaily.com.cn/business/2016-04/01/content_24241088.htm
5. http://ec.europa.eu/eurostat/documents/2995521/7225076/3-04042016-BP-EN.pdf/
6. https://www.ecb.europa.eu/press/pr/date/2016/html/pr160310.en.html
7.http://www.independent.co.uk/news/business/news/bank-of-england-eu-referendum-risks-plunging-the-uk-into-a-credit-crunch-a6957991.html
8. http://www.cnbc.com/2016/04/01/oil-taxes--and-big-problems-for-russias-economy.html
9. https://www.cer.org.uk/publications/archive/bulletin-article/2016/bazaar-eu-turkey-relations
10.http://www.economonitor.com/blog/2016/03/turkey-despite-political-headwinds-the-economy-is-resilient/
11. http://www.bloomberg.com/quote/CO1:COM
12. http://www.bloomberg.com/quote/HG1:COM
13. https://www.steelbb.com/steelprices/
