TURKEY: Formally Enters Recession With Surprise Downward Revision
- Q3 GDP data showed the economy formally entering a technical recession, with a second consecutive quarter of -0.2% growth – after the Q2 print was revised down from +0.1%. Annual growth hit 2.1% - lower than expected – and less than half the ~5% clip Turkey consistently posted before the pandemic.
- Separately, the CBRT have posted their Bi-annual financial stability report, in which they point to rising confidence in both the TRY as well as the disinflationary path in Turkey. They see markets priced as in-line with the policy rate.
- The themes and topics gel well with meetings said to have taken place earlier this week between the CBRT deputy governor and international investors in London, at which he said that the authorities are expected to intervene to a lesser extent in the future, with participation in FX declining over time. Akcay justified the ‘dirty’ float as being due to inefficiencies and deficiencies in the market – but there are no concerns with current valuations.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
GILTS: Budget Day Here, Curve Flattens To Start
Gilts play catch up to the recovery from yesterday’s lows in core global FI markets.
- There is some outperformance vs. peers after yesterday’s widening, with the presence of the impending Budget (12:30 London) amplifying vol.
- 10-Year gilt/Bunds ~3bp narrower, around 195bp.
- Futures trade as high as 95.97 before fading back to 95.90 last, +50 on the day.
- Resistance at the Oct 28 high (96.51), support at the Oct 29 low (95.29).
- Yields 4.0-5.5bp lower on the day, curve flattens.
- 5- to 20-Year yields hit the highest level since May/June yesterday, as pre-Budget positioning dominated.
- 5s/30s curve probes August lows.
- Our full Budget preview is available here.
- Markets look for this year’s gilt issuance remit to increase to GBP290-295bln.
- We assume a GBP15-20bln gilt issuance increase for the current fiscal year, mostly coming via the short- and long-dated buckets, as well as an increase in the size of the linker syndication bucket.
- Future years are probably expected to see a ~GBP10bln/year increase in illustrative gross financing requirement (IGFR) expectations.
- Increases around these levels would likely provide little market reaction.
- Anything higher than these levels would likely result in a gilt sell off, while anything materially lower would see some of the recent pressure (related to fears surrounding increased issuance) retrace.
SILVER TECHS: Trend Structure Remains Bullish
- RES 4: $36.050 - 2.236 proj of the Aug 8 - 26 - Sep 6 price swing
- RES 3: $35.226 - 61.8% of the 2011 - 2020 major bear leg
- RES 2: $35.167 - 2.00 proj of the Aug 8 - 26 - Sep 6 price swing
- RES 1: $34.903 - High Oct 23
- PRICE: $34.168 @ 08:19 GMT Oct 30
- SUP 1: $32.963 - High Oct 4
- SUP 2: $32.720/31.406 - 20- and 50-day EMA values
- SUP 3: $29.858- Trendline support drawn from the Aug 8 low
- SUP 4: $27.686 - Low Sep 6
Bullish conditions in Silver remain intact and the Oct 18 rally plus last week’s initial extension, reinforce the current trend set-up and confirm a resumption of the uptrend. Short-term weakness is considered corrective. Scope is seen for a climb towards $35.167, a Fibonacci projection. Moving average studies are in a bull-mode position, highlighting a dominant uptrend for now. Initial firm support lies at $32.720, the 20-day EMA.
SPAIN DATA: Q3 Flash GDP Stronger Than Consensus
Spain Q3 flash GDP was stronger than consensus at 0.8% Q/Q (vs 0.6% cons, 0.8% prior) and 3.4% Y/Y (vs 3.0% cons, 3.2% prior). Spanish outperformance versus other large Eurozone countries has been telegraphed in survey evidence throughout this year, with the October flash PMIs suggesting a similar development to begin Q4 (excluding France and Germany, the rest of the Eurozone "saw output increase at the fastest pace in four months").
- Growth continued to be driven by domestic demand, which contributed 0.9pp to the Q/Q print (vs 0.7pp in Q2). Meanwhile, external demand pulled down growth by 0.1pp (vs a +0.1pp contribution in Q2).
- By expenditure, household consumption remained solid at 1.1% Q/Q (vs 1.0% prior), but gross fixed capital investment surprisingly contracted -0.7% Q/Q (vs +0.3% prior).
- Export growth was 0.9% Q/Q (vs 0.7% prior) while imports grew 1.2% Q/Q (vs 0.6% prior).
- Gross value added was positive in all major sectors (industrial, construction and services), but negative in the primary sector.
