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MARKETS-WORLD-NEWSERIES
Markets hesitant, watching Turkey turmoil
LONDON, March 22, 2021 (BSS/AFP) – Asian and European equities were hesitant Monday as traders balanced vaccine-driven optimism against fears of spiking inflation — and also tracked brewing turmoil in Turkey, dealers said.
Asia and Europe faltered after a largely negative pre-weekend lead from Wall Street, despite global stimulus programmes aimed at countering the massive economic fallout from the coronavirus pandemic.
Oil prices were mixed and the dollar steadied against the euro and yen.
The Turkish lira meanwhile plunged nearly 15 percent in early trade after President Recep Tayyip Erdogan sacked the country’s market-friendly central bank chief Naci Agbal and replaced him with former ruling party lawmaker Sahap Kavcioglu.
The currency fell as low as 8.47 per dollar on Monday, having closed at 7.22 at the end of last week. It later recovered slightly.
Erdogan’s move has thrown the independence of the central bank into question and raised fears of a new bout of financial turbulence in the country that could have repercussions worldwide.
– ‘Unexpected’ Turkey shock? –
“Vaccination programmes, fresh fiscal stimulus and ongoing monetary stimulus from central banks are all fuelling hopes for a strong bounce back in economic output and corporate profits,” said AJ Bell investment director Russ Mould.
“But this means investors are potentially more exposed now to unexpected shocks — and Turkey could yet provide one.
“One thing that could be capable of knocking markets off their stride — beyond a resurgence of the virus — is an old-fashioned emerging markets wobble,” Bell warned.
While a presidential decree on Friday did not explain why Agbal had been removed, it came just a day after the Turkish central bank hiked interest rates a much more than expected two percentage points to 19 percent to fight inflation.
After a year-long rally, investors are now struggling to maintain the momentum as US government bond yields push ever higher — a sign that Federal Reserve interest rates will rise in the future to combat mounting inflationary pressures.
The sharp rise in US Treasury yields — which go in the opposite direction to prices — is being caused by investors selling the bonds owing to expectations the strong recovery and vast government spending will fire inflation higher.
The panic comes despite repeated pledges by Federal Reserve boss Jerome Powell and other top officials including Treasury Secretary Janet Yellen that any jump in inflation will likely only be temporary.
In a sign of the battle facing the Fed in keeping such fears at bay, a survey released Monday showed almost half the US economists asked thought the bank would hike rates from their record low next year.
While vaccine rollouts are picking up in Britain and the United States, investors are growing worried about Europe, where the inoculation programme has stuttered and a hike in new cases has forced countries to reimpose lockdowns.
– Key figures around 1145 GMT –
London – FTSE 100: UP 0.1 percent at 6,717.36 points
Frankfurt – DAX 30: UP 0.2 percent at 14,651.81
Paris – CAC 40: DOWN 0.2 percent at 5,983.60
EURO STOXX 50: FLAT at 3,838.03
Tokyo – Nikkei 225: DOWN 2.1 percent at 29,174.15 (close)
Hong Kong – Hang Seng: DOWN 0.4 percent at 28,885.34 (close)
Shanghai – Composite: UP 1.1 percent at 3,443.44 (close)
New York – Dow: DOWN 0.7 percent at 32,627.97 (close Friday)
Euro/dollar: UP at $1.1909 from $1.1904 at 2200 GMT
Pound/dollar: DOWN at $1.3865 from $1.3872
Euro/pound: UP at 85.90 pence from 85.82 pence
Dollar/yen: DOWN at 108.67 yen from 108.88 yen
Brent North Sea crude: DOWN 0.1 percent at $64.46 per barrel
West Texas Intermediate: UP 0.4 percent at $61.66 per barrel
BSS/AFP/TIT/1844HRS