Home Stocks Global Stocks Drop as Currency Crisis Roils Turkey

Global Stocks Drop as Currency Crisis Roils Turkey

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Global stocks declined Monday as Turkey’s economic turmoil and fears of possible contagion continued to strain markets and drove investors to safer assets.

The Stoxx Europe 600 was down 0.4% as declines in the health-care sector led the index lower.

Asian stocks also declined, with the Shanghai Composite Index 0.3% lower and Hong Kong’s Hang Seng down 1.5%. Japan’s Nikkei dropped 2%.

U.S. futures pointed to a lower open for the S&P 500.

The losses follow the continuing crisis in Turkey after the country’s currency shed 13.8% against the dollar Friday. On Monday, Turkey’s central bank said it would provide all liquidity to banks as needed, according to a statement on its website, and announced a set of measures to support the lira.

The Turkish currency was down 6.1% in early European trading, after falling as much as 10% in Asian morning trading. One dollar buys 6.9 lira.

Turkey is especially vulnerable because of its hoard of hard-currency debts, which becomes harder to repay as the lira depreciates. Investors are also concerned about the central bank’s ability to react, for example by raising interest rates, given President

Recep Tayyip Erdogan

has put in place measures that could curb its independence.

Turkish President Recep Tayyip Erdogan in a handout photograph released Aug. 12, by the Turkish Presidential Press Office.


Photo:

murat kula/Agence France-Presse/Getty Images

“Turkey’s problems are quite idiosyncratic and should be relatively well-contained outside of the obvious short-term risk-off unless there’s a major investor retrenchment from EM generally,” wrote

Deutsche Bank

strategists in a note Monday.

Still, other emerging markets also reliant on foreign investors were strained Monday. Indonesia’s JSX index fell 3.3% and the South African rand dropped 2.2% against the dollar.

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Meanwhile, investor demand for safer assets pushed the dollar to its highest point in over a year. The WSJ Dollar Index, which measures the currency against a basket of 16 others, rose 0.3% Monday after three consecutive weeks of gains. The Japanese yen also rose 0.6% against the dollar.

Yields on 10-year U.S. Treasurys rose slightly to 2.860% from 2.859% Friday afternoon. Yields move inversely to bond prices.

In commodities, Brent crude was 0.3% lower at $72.59 a barrel and gold fell 0.4% to $1,213.70 an ounce.

Write to Ben St. Clair at ben.stclair@wsj.com

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