Global stocks drop, triggered by Turkey’s deepening economic crisis

by

Jeremy Herron

New York | Stocks sold off around the world, with US equities erasing what would’ve been a sixth weekly gain as Turkey’s economic crisis deepened. The US dollar capped its best week since June as the lira sank to a record.

ASX futures were flat at 6218 at about 5.30am AEST. The Australian dollar shed 1 per cent to US72.99¢; it tumbled as low as US72.81¢. The overnight drop extended the Aussie’s slide v the US dollar so far this year to 6.6 per cent. The Kiwi, already having a rough week, slid 0.5 per cent to US67.51¢; it has fallen 7.2 per cent against the greenback year to date.

The S&P 500 Index slumped in thin trading, zapping gains that had taken it within striking distance of an all-time high. European and emerging-market equities bore the brunt of selling, with losses of more than 1 per cent after the US escalated a diplomatic row that tipped Turkey’s economy deeper into crisis.

The 10-year yield slid below 2.9 per cent as price data reinforced the Federal Reserve’s rate-hike intentions and investors sought havens. A government report on agriculture stocks sent soybean, cotton and wheat futures tumbling. Oil settled above $US67 a barrel.

Geopolitical tensions between the US and other countries set the tone for markets this week, with a speech from President Recep Erdogan doing little to quell investor angst that Turkey’s crisis will spread to other economies. The Trump administration doubled tariffs, exacerbating the issue.

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Earlier in the week, China responded to the Trump administration’s trade war volley with additional tariffs of its own. The rouble fell the most since the 2015 oil shock after the US announced new sanctions on Russia over a nerve-agent attack in the UK. Amid it all, Elon Musk roiled Tesla’s shares with a tweet signalled he’d take the firm private. The stock ended lower than where it was at the time of the missive.

These are the main moves in markets:

Stocks

The S&P 500 fell 0.7 per cent as of 4pm in New York. It dropped 0.25 per cent on the week. The Dow was 0.8 per cent lower. The Nasdaq fell 0.7 per cent.
The domestically focused Russell 2000 Index slipped 0.3 per cent.
The Stoxx Europe 600 Index sank 1.1 per cent.
Germany’s DAX Index lost 2 per cent.
The MSCI Emerging Market Index fell 1.7 per cent.
The MSCI Asia Pacific Index dipped 1 per cent.

Currencies

The Bloomberg Dollar Spot Index jumped 0.7 per cent to the highest in more than six weeks on the largest climb in a month.
The euro sank 1 per cent to $US1.1410, the weakest in 13 months on the biggest dip in more than two weeks.
The Japanese yen climbed 0.2 per cent to 110.852 per dollar.
The Turkish lira decreased 14 per cent to 6.46 per dollar, the weakest on record with the largest tumble in more than 17 years.

Bonds

The yield on 10-year Treasuries sank five basis points to 2.87 per cent.
Turkey’s 10-year surged 15 basis points to 20.34 per cent.
Germany’s 10-year yield fell four basis points to 0.33 per cent.
Italy’s 10-year yield increased nine basis points to 2.986 per cent.

Commodities

West Texas Intermediate crude increased 1.2 per cent to $US67.63 a barrel.
Gold futures decreased 0.1 per cent to $US1219.20 an ounce.
Corn, cotton and wheat futures slumped more than 2.3 per cent.

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