Euro, EM Currencies Drop on Turkey Contagion Fear: Markets Wrap

Publikuota: 2018-08-10
A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul, Turkey August 2, 2018. Picture taken August 2, 2018. REUTERS/Murad Sezer
A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul, Turkey August 2, 2018. Picture taken August 2, 2018. REUTERS/Murad Sezer
 

The euro slumped with emerging-market currencies and stocks declined amid concern Turkey’s problems are spilling over. The Turkish lira hit a fresh record low amid a souring of diplomatic relations with the U.S.

The dollar extended gains and the euro sank as the Financial Times reported the European Central Bank was concerned about the Turkish exposure of some European banks. Turkish investors are looking to President Recep Tayyip Erdogan to calm their nerves when he speaks Friday for the first time since the latest selloff began. Other emerging market currencies fell in sympathy, with the won particularly affected, declining over one percent against the dollar. U.S. and U.K. equity futures fell alongside Asian bourses and the yen strengthened.

“The euro is getting smoked on the FT story and breaking through key support in the process,’’ said Rodrigo Catril, currency strategist at National Australia Bank in Sydney.

Geopolitical tensions between the U.S. and other countries set the tone for markets this week as China responded to the Trump administration’s latest trade war volley with additional tariffs of its own. The ruble hit a two-year low after the U.S. announced new sanctions on Russia over the March 4 nerve-agent attack on a former double agent in the U.K.

Investors will be closely watching bank shares in Europe, with Spain’s Banco Bilbao Vizcaya Argentaria SA, UniCredit SpA and BNP Paribas SA mentioned in the Financial Times report. The ECB doesn’t see the situation as critical but is concerned about exposure to the plunge in the Turkish lira, it said, citing people familiar with the matter.

Elsewhere, Tesla shares rose in post-market trading after CNBC reported that its board planned to meet with financial advisers next week to formalize a process to take the co. private and would ask CEO Elon Musk to recuse himself from the process.

These are the main moves in markets: Stocks

Japan’s Topix index fell 1.2 percent as of 2:35 p.m. in Tokyo. The Shanghai Composite Index dropped 0.5 percent. Hong Kong’s Hang Seng Index sank 1.1 percent. Futures on the S&P 500 lost 0.3 percent. The underlying gauge fell 0.1 percent Thursday. Futures on the U.K.’s FTSE 100 Index lost 0.3 percent.

Currencies

The euro dropped 0.6 percent to $1.1457. The yen rose 0.2 percent to 110.92 per dollar. The offshore yuan sank 0.2 percent to 6.8593 per dollar. The Bloomberg Dollar Spot Index rose 0.4 percent. The lira dropped 2.1 percent.

Bonds

The yield on 10-year Treasuries slid three basis points to 2.90 percent.

Commodities

West Texas Intermediate crude fell 0.2 percent to $66.68 a barrel. Gold futures declined 0.3 percent to $1,209.14 an ounce. The Bloomberg Commodity Index fell 0.3 percent.

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