Turkey panic picks up stock | Reuters

SYDNEY / LONDON (Reuters) – Stocks fell and Turkish lira fell to a record low against the dollar on Monday after President Tayyip Erdogan shocked investors by replacing Turkey’s central bank governor with criticism of high interest rates.

PHOTO FILE: This photo, taken January 6, 2020, shows Turkish lira banknotes. REUTERS / Dado Ruvic / Illustration // File Photo

Erdogan’s move of the lira moved down as much as 15% against the dollar, the sharpest change since August 2018 when Turkish markets were in another case of their occasional crises.

“Authorities will have two options, either by committing to using interest rates to stabilize markets, or by imposing capital controls,” said Per Hammarlund, EM’s senior expert at SEB Research. .

“With President Erdogan’s increasingly authoritative approach, capital control looks like the most likely option.”

By 0800 GMT, the currency had recovered some of its losses to trade around 7.9904 as Finance Minister Lutfi Elvan said Turkey would abide by free market rules.

The uncertainty saw the index of Europe’s 600 largest stocks fall 0.5%, a milder rebound than 1.5% earlier in Japan’s Nikkei as retail investors suffered losses. which may be in large long positions in the high-yield lira.

Euro zone banks open to the country such as BBVA of Spain, UniCredit in Italy, BNP Paribas of France, and Dutch bank ING fell between 1.6% and 5.2%.

The ripples were more modest elsewhere, with U.S. stock times near the flat.

Yields on 10-year Finance notes fell five basis points to 1.68%, suggesting that some investors would prefer safe havens.

Investors are still struggling to cope with the recent rise in U.S. bond yields, which has left equity valuations for some sectors, particularly tech, looking stretched.

Bonds had other bonds on Friday when the Federal Reserve decided not to extend capital discounts to banks, which could reduce their demand for Finance.

The damage was limited, however, by the Fed’s promise to work on the rules to prevent tampering with the financial system.

Several Fed officials will speak this week, including three presentations by Chairman Jerome Powell, providing ample opportunity for more volatility in markets.

INCLUDING EMERGING MARKETS

Monday’s tumors in the lira saw the yen largely up, with significant gains on the euro and Australian dollar. That slowed the euro down the dollar slightly to $ 1.1890.

After an initial rally, the dollar quickly stood at 108.80 yen, while the dollar index fell slightly at 91.942.

Also supporting the yen were concerns about Japanese retail investors who have built long lira positions, a popular trade for the hungry product sector, being pushed out and another round of encourage the sale of lira.

However, analysts at Citi were skeptical that the program would lead to widespread pressure on emerging markets, noting that the last time the lira slipped in 2020, there was not too much pour in.

“In terms of impact on other high yielding parts of EM, we believe this will be very limited,” Citi said in a note.

There was little sign of a safe demand for gold, which fell 0.7% to $ 1,731 an ounce.

Oil prices fell fresh, after losing nearly 7% last week as concerns about global demand prompted speculators to take profits on long positions after a long bull run. [O/R]

Brent crude went down 60 cents, or 1%, at $ 63.94 a barrel by 0836 GMT. U.S. oil declined by 56 cents, or 0.9%, at $ 60.86 a barrel. Both contracts fell more than 6% last week.

Reciting with Wayne Cole and Lawrence White; Edited by Lincoln Feast and Christian Schmollinger and Kirsten Donovan

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