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Lira rebound buoys European markets; weak data drags China stocks

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Lira rebound buoys European markets; weak data drags China stocks

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? European shares rise as lira rebounds.

? Dollar weakens against rand, ruble; Indian rupee hits record low.

? China stocks slide on disappointing economic data; Japan shares rally.

? Wall Street set to open higher.

Futures signaled Wall Street opening higher as European stock markets rebounded in early trade amid easing worries on Turkey's economic turmoil.

The Turkish lira was up 4.83% against the dollar as of 6:50 a.m. ET, snapping a string of declines following reports that Finance Minister Berat Albayrak would be holding an official conference call with global investors and after the central bank yesterday introduced measures to boost liquidity. Turkish President Recep Tayyip Erdogan earlier today urged his country to boycott electronic products from U.S. companies in response to sanctions and reiterated that he would not yield to Washington, the Financial Times reported.

"The rebound in the lira appears to be driven by a weaker U.S. dollar, along with comments from Turkish business groups that urged the government to adopt tighter monetary policy and a road map to reduce inflation," said Michael Hewson, chief market analyst at CMC Markets UK. But he noted that a recent meeting between John Bolton, the U.S. national security adviser, and the Turkish ambassador to the U.S., Serdar Kiliç, over detained pastor Andrew Brunson, a key point in the diplomatic rift between the countries, passed without any apparent progress.

The spot dollar index was down 0.15% as the dollar also fell against currencies of other emerging markets, which are vulnerable to dampened investor confidence stemming from the lira's rout. The South African rand gained 2.12%, and the Russian ruble climbed 0.94%, while the Indian rupee was up 0.14% after hitting a record low of 70 to the dollar earlier today.

The Borsa Istanbul 100 index rose 1.30%, and other European stock markets posted slight gains, with the German DAX index up 0.23%, France's CAC 40 rising 0.24% and the FTSE 100 edging 0.07% higher. The Nikkei 225 index closed 2.28% higher as the safe-haven Japanese yen shed 0.22% against the dollar.

The Shanghai Composite index closed down 0.18% after Chinese industrial production and retail sales grew more slowly than expected in July and fixed-asset investment declined. Hong Kong's Hang Seng index finished 0.66% lower, with Tencent Holdings Ltd. down 3.43% after Chinese regulators blocked the company from selling a popular video game on its distribution platform.

The euro was largely flat against the dollar after second-quarter eurozone GDP growth was upwardly revised, bolstering the European Central Bank's plan to start scaling back its quantitative easing program, said Jack Allen, senior European economist at Capital Economics. Germany also posted slightly better-than-expected GDP growth in the second quarter, giving reassurance that the economy's soft start to the year partly reflected temporary factors and has not been sustained, said Jessica Hinds, European economist at Capital Economics.

The British pound gained 0.12% against the dollar after U.K. unemployment fell to its lowest since early 1975, though wage growth undershot expectations.

The 10-year yields on German bunds added 2 basis points to 0.333%, while yields on 10-year Treasurys rose less than 2 basis points to 2.898%. While it appears that credit markets are showing the first signs of stabilization, the deterioration in market sentiment has hampered bond sales, Rabobank analyst Ruben van Leeuwen said.

"Headlines from Turkey tend to cause visible contagion into peripheral [European government bonds]. We expect this momentum to continue," Société Générale analyst Guy Stear said.

Brent crude oil rose 0.99% to $73.33 per barrel on the ICE Futures Exchange after Saudi Arabia was confirmed to be slashing production to avoid oversupply. Gold climbed 0.14% to $1,195.19 per ounce.

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The day ahead:

8:30 a.m. ET — U.S. import and export prices

8:55 a.m. ET — U.S. Redbook