Skip to main content

Turkish currency's freefall rocks equity markets, euro




A plunge in the Turkish lira rocked global equities and emerging markets on Friday and fear of further fallout sent investors scurrying for safety in assets like the yen and U.S. government bonds.

European shares and a gauge of global equity markets closed down more than 1 percent, while losses on Wall Street fell nearly as much. Germany’s DAX index slid 2 percent.

The lira fell as much as 18 percent against the dollar in its worst day since Turkey’s financial crisis of 2001. 

The plunge followed a deepening rift with the United States, worries about its own economy and lack of action from policymakers.

President Tayyip Erdogan told Turks to swap gold and dollars into lira as the currency tumbled after President Donald Trump doubled U.S. tariffs on metals imports from Turkey.

Turkey later warned the United States that sanctions and pressure would only serve to harm ties between the two NATO allies, adding Ankara would continue to retaliate as necessary against U.S. tariffs.

The lira has fallen more than 40 percent this year, fanning worries about a full-blown economic crisis.

Bank shares across Europe fell and the euro slipped to its lowest since July 2017 as the Financial Times quoted sources as saying the European Central Bank was concerned about European lenders’ exposure to Turkey. 

The country is not a member of the European Union but is economically linked to it.

The dollar rose as exposure to Turkey could impact European banks and spark a domino effect as people begin to pull out of those banks and into U.S. assets, said Gregan Anderson, macroeconomic strategist at brokerage Bulltick LLC.

The turmoil has made it difficult for global investors to justify remaining in Europe and is negative for emerging markets, he said.

Policy errors created the current situation, with the central bank’s decision not to raise rates in their last meeting a key driver, said Charlie Wilson, an emerging markets-focused portfolio manager at Thornburg Investment Management in Santa Fe, New Mexico.

“The lira has been weakening since and it’s coming to a head today,” Wilson said, adding the downward spiral will continue if Turkey insists on a soft landing.

“The only way to correct these policy mistakes is to really make some concrete changes on the fiscal and monetary side.”

Shares in France’s BNP Paribas, Italy’s UniCredit and Spain’s BBVA, the banks seen as most exposed to Turkey, fell 3 percent or more.

An index of regional banking shares closed down 3.2 percent while the pan-European STOXX 600 index fell 1.07 percent.

The MSCI All-Country World index, which tracks shares in 47 countries, was down 1.19 percent and erased all its gains for the week.

Wall Street also fell.

The Dow Jones Industrial Average fell 261.53 points, or 1.03 percent, to 25,247.7. The S&P 500 lost 25.67 points, or 0.90 percent, to 2,827.91 and the Nasdaq Composite dropped 64.41 points, or 0.82 percent, to 7,827.37.

Investors piled into “safe” government debt, with German yields hitting three-week lows and the yield on the benchmark U.S. 10-year Treasury note falling to 2.8605 percent as investors sought its safety.

The safe-haven Japanese yen hit a one-month high of 113.38 against the dollar.

The dollar index, which measures the greenback’s strength against a group of six major currencies, breached 96, taking it to its highest level since July 2017. It was last up 0.9 percent at 96.364.

Emerging market stocks lost 1.77 percent, while the Mexican peso, a proxy for emerging market currencies, shed 1.63 percent to the dollar.

Adding to emerging market currency woes was the Russian ruble, which weakened to 67.6825 to the dollar. 

Overnight it had retreated to its lowest since November 2016 on threats of new U.S. sanctions, weakening beyond the psychologically important 65-per-dollar threshold.

Oil prices rose more than 1 percent as U.S. sanctions against Iran looked set to tighten supply, but futures remained lower for the week as investors worried that global trade disputes could slow economic growth and hurt demand for energy.

Benchmark Brent crude oil rose 74 cents to settle at $72.81 a barrel. U.S. light crude settled 82 cents higher at $67.33 a barrel.

U.S. gold futures for December delivery settled down 90 cents, or 0.1 percent, at $1,219 per ounce.

Comments

Popular posts from this blog

Armenian protesters block traffic, railways & airport as protest leader loses PM bid

Anti-government protesters disrupted traffic in Armenia’s capital, blocking railways and roads leading to Yerevan International Airport, after the parliament voted against opposition leader Nikol Pashinyan’s bid for interim PM.
Protesters managed to block streets connecting downtown Yerevan to residential districts, disrupting transportation in Armenia’s capital, footage from the scene shows. 
Yerevan’s metro system has also been paralyzed as demonstrators sit on the tracks, preventing trains from passing.
Meanwhile, protesters disrupted traffic on a road leading to Yerevan’s Zvartnots International Airport, located just 12km from the center of the city. 
Consequently, some passengers had to go the rest of the way on foot in order to catch their flights, according to Sputnik news agency.
Railway services have also been disrupted all across the country amid the demonstrations, a spokesman for South Caucasus Railways confirmed to Interfax. 
Some other highways, including the one connecting th…

Syria threatens to ‘strike Tel Aviv airport’ unless UNSC acts against Israel’s impunity

Damascus has threatened to exercise its legitimate right for self-defense against Israeli aggression and target Tel Aviv airport in a mirror response, unless the Security Council puts an end to IDF intrusions into Syrian airspace.
Apparently fed up with years of Israeli impunity in the Syrian skies and regular strikes carried out in the vicinity of Damascus International Airport, Syria has threatened to retaliate in explicit terms.
“Isn’t time now for the UN Security Council to stop the Israeli repeated aggressions on the Syrian Arab Republic territories?” Syria’s permanent representative to the UN, Dr. Bashar al-Jaafari wondered Tuesday.

Or is it required to draw the attention of the war-makers in this Council by exercising our legitimate right to defend ourself and respond to the Israeli aggression on Damascus International Civil Airport in the same way on Tel Aviv Airport?
Air strikes against alleged ‘Iranian targets’ in close proximity to Syria’s busiest airport have become a norm for…

Iran showcases massive UNDERGROUND missile factory, with new rockets & warheads galore

As Tehran unveiled its newest weapon, it also shared rare footage of a secretive underground complex where Iranian missiles are being built. 
It has vowed to carry on with its missile program, despite objections from the West.
Iran’s new missile was showcased on Thursday, with top military officials unveiling the weapon and, in an unprecedented move, showing the subterranean factory. 
The location of the facility was not disclosed, for obvious reasons.
The facility was described by the Iranian media as an “underground city” – and its scale appears to be quite impressive. Footage from the scene shows vast corridors, full of various missile parts, including warheads, all at different stages of assembly.
The videos also showed workers at the plant fulfilling tasks, from merely spinning nuts to fine-tuning some tiny electronic devices, thought to be parts of the missiles’ guidance system.
The new missile, called Dezful, is said to be an upgraded version of the Zolfaghar ballistic missile. 
It bo…