Week Ahead Macro View: MSCI Shock and an AI Selloff, All Eyes on the 22 October CBRT Meeting

Good markets to all,

The week behind us showed how fragile Borsa Istanbul's post-fund-crisis "breathing room" really is. After ending the previous week flat, the BIST 100 rose as high as 12,291 on Monday but traded heavy through the week, and on Friday it fell 2.89% to close at 11,721.72 following MSCI's announcement. The weekly loss was 4.44%; the index dipped as low as 11,653 during the week and, at roughly $235 in dollar terms, tested its lowest level since June 2025. MSCI said it was freezing certain index changes for Turkish stocks "effective immediately," citing concerns about transparency and trading reliability. The decision does not change Türkiye's emerging market status for now, but MSCI said it could consider frontier or standalone status if sufficient progress is not made by June 2027. Every sector index fell on Friday: financial leasing and factoring lost 5.72%, metal products and machinery 4.91%, and insurance 4.26%; Astor closed down 9.99%, BIM 5.11% and Aselsan 3.06%. Turnover was heavy at TRY 116.2 billion. USD/TRY ended the week up 0.37% at 49.53 and EUR/TRY up 0.93% at 55.76; gram gold was flat at TRY 6,648. Among investment funds, the only clear winner of the week was money market funds, up 0.83%.

The direction of macro data, however, was more positive than the stock market. The August current account posted a $4.05 billion surplus, beating the $3.5 billion expectation; the CBRT's gross reserves rose by $4.2 billion to $171.6 billion in the week of 9 October, ending a six-week run of declines. The fund liquidation bill cleared the parliamentary Plan and Budget Committee on Wednesday, and the Fund Board said TRY 6.4 billion had been paid to 43,643 investors in funds run by three portfolio management companies. On the other hand, the September budget posted a TRY 532.2 billion deficit, and the nine-month deficit came in 51% above last year's. The CBRT's Market Participants Survey showed the year-end inflation expectation flat at 29.63% and the 12-month-ahead expectation edging up to 23.89%; participants expect the policy rate at 36% after the October MPC.

Abroad, the week had two main themes: US inflation and the financing of AI investment. September CPI came in at 3.7% year on year, above the 3.6% expectation; core inflation also beat expectations by 0.1 point at 2.6%. Gasoline prices rose 9.1% on the month and 34.2% on the year, accounting for more than half of the monthly increase on their own. The data briefly pushed the US 10-year Treasury yield above 5.30% intraday on Wednesday; the same day, AI infrastructure company CoreWeave's shares fell 15.5% and its bond yields rose above 15%. On Friday the worry spread to large-cap tech: CoreWeave fell 12%, AMD 6%, Intel 5.8%, Micron 5.6% and Meta 3.7%; chip stocks declined for an eighth straight day, their longest losing streak since 2008. The Nasdaq ended the week down 4.5% at 26,140 and the S&P 500 down 1.95% at 7,659; both indices had their worst week since June. The Dow Jones, supported by banks and energy stocks, rose 0.7% to 52,002, its second weekly gain in a row. Interestingly, investors moved into bonds as they left risk assets: the 10-year yield finished the week at about 5.09%, below the previous week's 5.24%. Fed Chair Warsh declined to give any rate signal in Bangkok on Friday; markets price roughly a 72% chance that rates stay unchanged at the 27-28 October meeting and roughly a three-in-four chance of a December hike.

Macroeconomy · Geopolitics · Global

1 MSCI warning: status unchanged, but the question mark has grown. MSCI's announcement, which hit the market on Friday, froze certain index changes for Turkish stocks with immediate effect and cited concerns over transparency and trading reliability. The decision does not change Türkiye's place in the emerging markets category for now; but MSCI said frontier or standalone status could come onto the agenda if there is not enough progress by June 2027. That is a medium-term risk for Türkiye's weight in index-tracking passive funds. The timing is sensitive too: on the same day, Finance Minister Şimşek said legal changes to fight capital market crimes, including coordinated fund transactions, are planned to be completed by early 2027. That leaves a window of about five months between the regulatory steps and MSCI's timetable. The market's first reaction was harsh; but what will decide the status question is the content and pace of capital market reforms over the coming months.

2 Current account surplus beats expectations, reserves recover. The August balance of payments released on Tuesday showed a $4.05 billion current account surplus; the balance excluding gold and energy showed an $8.21 billion surplus. Services stayed strong at $9.71 billion, with net travel income of $7.29 billion. The 12-month rolling current account deficit stands at about $42.1 billion, and oil staying above $100 is an upside risk to that figure. In August, foreigners made $1.05 billion of net purchases of equities and investment funds, but the overall portfolio account saw a $1.03 billion outflow. On the weekly data, in the week of 9 October gross reserves rose by $4.2 billion to $171.6 billion, net reserves from $53.8 billion to $57.7 billion, and net reserves excluding swaps from $37.9 billion to $44.2 billion. This first increase after losses of more than $21 billion since 21 August eases financial stability concerns somewhat ahead of the MPC.

3 Budget: a large September deficit and a growing interest bill. The central government budget posted a TRY 532.2 billion deficit in September, compared with TRY 309.6 billion in the same month last year. The primary balance showed a TRY 269.2 billion deficit, far above TRY 73 billion a year earlier. In January-September, spending rose 36.4% and revenue 34.5%; the nine-month deficit reached TRY 1.84 trillion, 67.8% of the full-year target. Interest expenses rose 35.4% over nine months to TRY 2.25 trillion. The budget had posted a TRY 12.9 billion surplus in August, so part of September's widening is seasonal; but the extra burden from the fund crisis and the high-rate environment bring the question of fiscal and monetary policy alignment back onto the agenda before the MPC.

4 Ahead of the MPC: a cut is the base case, the tone will decide. In Matriks Haber's survey, 32 of 37 economists expect a 100 bp cut on 22 October, bringing the policy rate to 36%; two expect a hold, and one each expects cuts of 50, 150 and 200 bp. 29 of 33 respondents expect another cut in December. In the CBRT's Market Participants Survey, the year-end CPI expectation rose from 29.61% to 29.63% and the 12-month-ahead expectation from 23.70% to 23.89%; the 24-month-ahead expectation fell from 18.32% to 17.94%. The year-end USD/TRY expectation is 51.55 and the 2026 growth expectation is 2.9%. September inflation falling below 30% had opened the door to a cut; the MSCI decision, the stock market slide and higher oil now give the committee reasons to choose a more cautious tone.

5 US inflation: gasoline drove the headline, transport and shelter pushed core. In September, annual CPI rose from 3.4% to 3.7% and core from 2.4% to 2.6%. Gasoline rose 9.1% on the month and 34.2% on the year, energy 20.4% on the year; airline fares were up 22.4% year on year. According to AAA, gasoline is at $4.33 a gallon, far above the $2.98 before the Iran war; diesel hit a record $6.29 at the end of September. After the data, Capital Economics raised the odds of an October hike from 20% to 50%. But Warsh's "I don't prejudge meetings" on Friday, together with the loss of risk appetite from the tech selloff, pushed the CME-implied probability of an October hold to about 72%. The Fed raised rates to a 3.75-4.00% range in September by a 12-0 vote; Williams said one more hike may be appropriate, while Bowman said she sees no pressing need to move.

6 Warsh: no signal, an emphasis on "synchronous tightening". Speaking with Georgieva at the IMF-World Bank meetings, Warsh said the Fed no longer provides forward guidance and that "it's a new chapter at the Fed." He stressed there is "synchronous tightening in monetary policy in most places around the world" and "no free riders." He called AI "probably the most consequential change" for the economy in his lifetime; he said AI spending is currently pushing prices up by adding to demand, that he expects it to eventually lift productive capacity, but that the path will be "very bumpy." The quiet period before the Fed's 27-28 October meeting began on Saturday; there will be no comments from Fed officials this week.

7 Oil: the $110 threshold and three separate supply risks. On Friday Brent rose 3.7% to $109.86 and WTI rose 3.5% to $101.41; weekly gains were 4.9% for Brent and 10.4% for WTI. Brent touched $110 intraday and posted its highest close since 19 May. A Saudi-led coalition said it intercepted a ballistic missile aimed at the Yanbu export port; a Ukrainian drone strike shut a main unit at a large Russian refinery. According to Kpler, 11.62 million barrels a day passed through Hormuz in the week to 13 October, against a normal level of 17.15 million. US commercial crude inventories fell 8.6 million barrels, the largest draw since February. The IEA members' release of more than 20 million barrels of diesel and the US Department of Energy's offer to exchange up to 17 million barrels from the strategic reserve did not cap prices. The EIA expects Brent to average $105 in the fourth quarter.

8 Gold flat, silver and crypto weak. Spot gold ended the week about 0.7% lower at around $4,165; it fell 1.3% on Wednesday after the inflation data and recovered by the same amount on Thursday. Silver lost 6.3% to $57, including a 6% drop on Wednesday alone. Bitcoin closed the week at about $81.5K, down roughly 3%. Renewed rate-hike expectations and the tech selloff also cut risk appetite in crypto. Ethereum is around $2,436.

Sectors

1 Financial leasing and factoring: the epicenter of the fund crisis loses the most again. The sector index, down 5.72% on Friday, was among the weakest groups every day of the week. The fund investigation keeps weighing on these companies; according to the Fund Board, in-kind and cash liquidation across 66 funds and 45,745 investors totals TRY 40.5 billion. The bill allows interim payments of up to TRY 1 million per investor and provides for recovering value unlawfully taken from fund assets from those responsible. Reports that the fund crisis pushed the rate of personal loans turning non-performing to a peak have also put credit risk for banks on the agenda.

2 Banking: the week's relatively strong group, but no escape from Friday's selloff. The banking index was up 1.5% on the week as of Thursday's close, outperforming the market; on Friday it fell 1.87%. The expected rate cut at the MPC is read positively for banks, on expectations of lower deposit costs and better net interest margins. Akbank closed Friday down 1.69% at TRY 66.85. Q3 results, with the season starting this week, will show the fund crisis's impact on asset quality for the first time.

3 Energy and industrials: the stocks hit hardest by the MSCI selloff. On Friday Astor Enerji fell the 10% daily limit at 9.99%, Pamel Yenilenebilir dropped 5.5% and Zorlu Enerji 5.1%. The metal products and machinery index fell 4.91% and mining 4.10%. These stocks' prominence over the past two years on the back of foreign and index-fund interest made them more sensitive to the MSCI news. On housing, September sales fell 9.3% year on year to 142,390; first-hand sales rose 3.9% while second-hand sales fell 15.3%, and mortgage sales rose 5.1%. August retail sales volume rose 10.1% year on year, showing domestic demand remains lively.

4 US tech: the financing question overshadowed earnings. The week's most striking contrast was the sector's sharp drop despite strong AI earnings. Investors began asking whether AI spending will generate enough return, especially for debt-funded companies. The semiconductor index (SOX) was down 7.5% in October as of Wednesday; on Friday only seven of the 75 tech stocks in the S&P 500 closed higher. The postponed IPO of Nvidia-backed data center operator Firmus in Australia also showed caution over valuations. US energy stocks, by contrast, rose with oil: Exxon gained 2.5% and Chevron 2.6%.

Companies

1 TSMC: record profit and a higher investment plan. The world's largest chipmaker reported Q3 revenue of NT$1.494 trillion (about $46.7 billion), up 50.9% year on year and above its $44.6-45.8 billion guidance. Net profit rose 68.7% to NT$763.1 billion, beating the analyst expectation of NT$746.3 billion. Gross margin was 66.4%, down 1.3 points from the previous quarter because of the cost of ramping 2-nanometer production. The company raised its 2026 capex guidance to $60-64 billion. The strong results show AI demand is continuing, but they did not stop the slide in chip stocks.

2 US banks: strong trading revenue, JPMorgan below expectations. JPMorgan earned $5.57 per share, below the $5.90 expected; adjusted EPS excluding $658 million of securities losses was $5.75. Net interest income rose 13% to $27.1 billion; Jamie Dimon listed "large fiscal deficits, sticky inflation, elevated asset prices, rising interest rates" as risks. At Goldman Sachs, equities trading revenue rose 72% to $6.44 billion and EPS was $17.01. Citigroup reported its best third-quarter revenue in a decade ($23.8 billion). Bank of America's results were weighed down by a $1.2 billion regulatory settlement charge.

3 CoreWeave: the litmus test for AI debt. Shares of AI infrastructure company CoreWeave fell 15.5% on Wednesday and 12% on Friday; its bond yields rose above 15%. Bloomberg reported that the bonds traded at levels associated with financial distress; this is not a sign of default but a measure of investor concern. CEO Michael Intrator wrote in a note to staff that the market at times "misunderstands and acts irrationally." PitchBook analyst John Atkins described the company as "a bellwether for the riskier cusp of hyperscaler sentiment."

4 Fund investigation and KAP: payments have begun, the timetable is getting clearer. At the Fund Board's fifth meeting it was announced that Ziraat Bankası had paid a total of TRY 6.4 billion to 43,643 investors in three funds; liquidation of about TRY 34.1 billion in the remaining 49 funds was targeted for completion by the end of the week. The bill was submitted to parliament on 9 October, cleared committee on 14 October and is awaiting debate in the General Assembly. President Erdoğan said the fund problem is "under control" and that "the price of excessive gains" will be collected. Borsa Istanbul's Q3 earnings season also begins this week.

Week Ahead: MPC Thursday and AI Earnings

The week ahead will test monetary policy in Türkiye and the AI theme in the US. At home, the agenda centers on Thursday's 14:00 MPC decision: inflation falling below 30% in September, the current account surplus and the recovery in reserves support a 100 bp cut; the MSCI decision, the stock market selloff and oil nearing $110 give the committee grounds for a cautious tone. Consumer confidence on the day of the decision, along with Wednesday's real sector confidence and capacity utilization, will show how the fund crisis has affected household and corporate expectations. Abroad, Tesla and Meta on Wednesday evening and Netflix on Tuesday evening will be watched for management comments on the pace and financing of AI investment. With the Fed in its quiet period, data and earnings will drive US rate expectations this week; Friday's flash PMIs will show how well economic activity is holding up under high rates.

This Week's Calendar

Monday 19 October — China Q3 GDP (05:00 TRT; expected 4.4% y/y, prior 4.3%), September industrial output (prior 5.2%) and retail sales (prior 0.4%). Canada September CPI (15:30; prior 3.0%). US NAHB housing market index (17:00; prior 32). Earnings: Fifth Third (before the open), Steel Dynamics, W.R. Berkley (after the close).

Tuesday 20 October — Treasury central government debt stock (17:30; prior TRY 15.894 trillion). China loan prime rates (04:15; 1-year 3.0%). UK unemployment (09:00; prior 4.9%). Germany and euro area ZEW (12:00; Germany prior 34.7). US housing starts and building permits (15:30). Earnings: GE Aerospace, General Motors, RTX, 3M, Northrop Grumman (before the open); Netflix, Capital One, Intuitive Surgical (after the close).

Wednesday 21 October — Real sector confidence and capacity utilization (10:00; prior 102 and 74.2%). UK September CPI (09:00; expected 3.4%, prior 3.1%). Bank Indonesia rate decision. Speeches by BoE Governor Bailey (16:00) and ECB President Lagarde (19:00). EIA oil inventories (17:30). Borsa Istanbul's Q3 earnings season begins. Earnings: AT&T, Abbott, Philip Morris (before the open); Tesla, Meta, IBM, Texas Instruments, SAP, Lam Research (after the close).

Thursday 22 October — CBRT MPC rate decision (14:00; policy rate 37%, overnight lending 40%, borrowing 35.5%; survey expectation 36%). Consumer confidence (10:00; prior 91.9). CBRT weekly reserves (14:30). Bank of Korea rate decision. US weekly jobless claims (15:30). Euro area flash consumer confidence (17:00; prior -16.5). Earnings: Procter & Gamble, Lockheed Martin, Union Pacific, Comcast, Blackstone, Valero (before the open); Newmont, Western Digital (after the close).

Friday 23 October — Japan September CPI (02:30; prior 1.9%). UK retail sales (09:00). France, Germany and euro area flash PMIs (10:15-11:00; Germany manufacturing prior 53.9, euro area manufacturing prior 52.9). Bank of Russia rate decision (13:30). US flash manufacturing and services PMI (16:45; manufacturing prior 55.9). Final Michigan consumer sentiment (17:00; prior 48.1). Earnings: American Express, SLB.

Further ahead — 27-28 October Fed meeting. 29 October Intel earnings.

5 Things to Watch

1 MPC: a cut, or a cautious cut? The base case is a 100 bp cut to 36%. But how the statement frames the MSCI warning and the fund crisis's impact on financial stability will shape expectations for the rate path. Since most economists expect another cut in December, any forward-looking signal of a slowdown would matter for bond yields and the lira.

2 Foreign flows after MSCI. How much of Friday's selling came from index-based funds will show up in this week's securities statistics. For an index that has fallen to its lowest dollar-based level since June 2025, the timetable for concrete regulatory steps will be decisive.

3 AI earnings: the tone of spending plans. Results from Meta, Tesla, Texas Instruments and Lam Research will directly address the question behind the week's selloff: "Will AI investment generate returns?" Capex guidance and financing methods in particular will be in focus.

4 Will oil hold above $110? For Brent, closes above $109.50 would bring the $114.50-115 band into play, while a move back below $105.92 would signal easing pressure. Hormuz transit data and Wednesday's EIA inventories are key.

5 US rate expectations: with no Fed talk, earnings do the talking. The Fed is in its quiet period; the probability of an October hold is about 72%. A rise in the price sub-indices of Friday's flash PMIs could push the odds of an October hike back up.

Technical View

SPY (S&P 500 ETF) — Closed at $763.25 on 16 October; -1.97% on the week, +1.22% over one month, +2.69% over three months, +15.53% over one year. Weekly volatility annualized at 11.5%; worst day Friday (-1.11%). The 25 August model summary marked $779.37 as resistance and $760.40 as support; the price is just above that support.

QQQ (Nasdaq 100 ETF) — Closed at $709.80 on 16 October; -5.52% on the week, +0.72% over one month, +2.08% over three months. It pulled back 4.9% from its weekly high; worst day Friday (-2.50%). The 28 September model summary identified $734.58 as support, and the move below that level invalidates the summary's positive view. The mean-reversion signal opened on 22 September closed at its $729.02 stop.

Gold (XAU/USD) — $4,164.72 as of 17 October; -0.74% on the week, -4.08% over one month, +3.84% over three months. The 28 September model summary marked $4,165.68 as resistance and $4,023.50 as support; the price is sitting right at resistance.

Bitcoin (BTC/USD) — $81,169 as of 18 October; -3.11% on the week, +0.35% over one month, +24.39% over three months, -24.29% over one year. The 26 September model summary said closes below $82,814 would trigger a short-term downside scenario; the price is below that level.

BIST 100 — The 11,721.72 close is 4.44% below the previous week's 12,265.98; the intraweek range was 11,653-12,291. Supports flagged by analysts on Friday are 11,600 and 11,500, with resistance at 11,800 and 11,900. In dollar terms, the roughly $235 level is the lowest since June 2025.

Closing

The week behind us was one where macro data worked in Türkiye's favor and market perception worked against it. The current account surplus, the recovery in reserves and the start of payments in the fund liquidation were concrete improvements; but MSCI's warning added fresh uncertainty about Türkiye's index position for foreign investors and pushed the stock market to its lowest dollar-based level in sixteen months. In the US, rising inflation and worries over how AI investment is financed landed in the same week; tech stocks selling off hard while bond yields fell shows the market's focus shifting from growth to the cost of financing it.

The equation for the week ahead is clear: Thursday's MPC decision, and especially the tone of its statement, will set the direction for local assets after the MSCI shock. Abroad, AI earnings will give the first answers to whether the week's selloff is a correction or the start of a longer valuation debate. Oil staying around $110 remains the most important background risk for inflation and rate expectations on both fronts.

Methodology note: The S&P 500 weekly change was calculated from the 9 October close (7,811.54) and the 16 October close (7,659.44). Because sources differed on the Nasdaq and Dow weekly changes, figures from Eurasia Business News, which reported Friday closing data, were used; QQQ's 5.5% weekly loss confirms the direction. Friday settlement prices were used for Brent and WTI; some sources quoting intraday prices show lower levels. The model summaries used for SPY, QQQ, gold and Bitcoin are dated 25 August to 28 September and are not current; they were used only as level references. The banking index's weekly performance is based on data through Thursday's close. S&P Global Ratings did not publish a new assessment of Türkiye on its scheduled 16 October date; the rating remains BB-/stable.

This bulletin is not investment advice; it is a data summary.