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Turkish turmoil spreads to emerging-market currencies, global stocks


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Turkish turmoil spreads to emerging-market currencies, global stocks

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? Asian, European shares slide as Turkey worries persist.

? Lira extends losses even as central bank bolsters liquidity.

? Dollar up amid emerging market selloff.

? Wall Street set to open lower.

Futures point to Wall Street opening lower as a continued selloff in the Turkish lira weighed on global stocks and currencies.

The lira was trading 6.72% lower against the dollar as of 6:44 a.m. ET, even after the Turkish central bank moved earlier in the day to bolster liquidity, including reducing banks' reserve requirements. The continued decline in the lira came after Turkish President Recep Tayyip Erdogan vowed Friday never to yield to calls to hike interest rates and U.S. President Donald Trump the same day said tariffs on Turkish steel and aluminum would be doubled to 50% and 20%, respectively.

"With no indication that either Erdogan or his new finance minister and son-in-law, Berat Albayrak, are looking to change course, the outlook is already having ripple-out effects into other emerging markets, as well as raising concerns about European bank exposure to the Turkish economy and the banking system," said Michael Hewson, chief market analyst at CMC Markets UK. Albayrak has said Turkey would unveil an economic plan to calm markets.

The rout in the lira spread to other emerging-market currencies, with the South African rand dropping 2.40% against the dollar and the Indian rupee weakening 1.15%. Behind Turkey, South Africa is the second-most dependent among emerging markets on short-term foreign capital, said Jason Daw, an analyst at Société Générale. He said: "The rand should continue to be influenced by the lira crisis through the sentiment channel; until the lira stabilizes the prospects for the rand are not encouraging."

The euro, British pound and Chinese yuan all traded lower against the dollar, while the safe-haven Japanese yen rose 0.51%.

The Borsa Istanbul 100 index was down 4.01% and other European stock markets also dropped, with the FTSE 100 dipping 0.57% and the Euro Stoxx 50 retreating 0.65%. Shares in lenders BNP Paribas SA, Banco Bilbao Vizcaya Argentaria SA and UniCredit SpA extended their losses from Friday amid concerns about their exposure to Turkey, while drugmaker Bayer AG plunged more than 10% after a U.S. court ruling found that a weedkiller made by recently acquired unit Monsanto Co. caused a school groundskeeper's cancer.

Asian stock markets saw steeper losses earlier, with Japan's Nikkei 225 closing down 1.98% and Hong Kong's Hang Seng Index finishing 1.52% lower. The Shanghai Composite index slipped 0.34% amid reports that the People's Bank of China will not competitively devalue the yuan or wield it as a tool amid rising trade tensions.

The yields on 10-year German Bunds were steady at 0.318%. The yields on 10-year Treasurys stood at 2.870%.

Brent crude oil ticked up 0.08% to $72.87 per barrel on the ICE Futures Exchange. Gold fell 0.72% to $1,201.82 per ounce.

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