Connect with us

Hi, what are you looking for?

Stock

Asia stocks hesitant as bonds boosted by Turkish tumult

Stock Markets12 minutes ago (Mar 22, 2021 01:00AM ET)

2/2

(C) Reuters. FILE PHOTO: Turkish lira banknotes are seen in this illustration

2/2

By Wayne Cole

SYDNEY (Reuters) – Asian stocks turned mixed and bonds bounced on Monday as a plunge in the Turkish lira sparked talk that capital controls might be needed to stem the rout, though the wider fallout was relatively restrained for the moment.

The dollar was trading almost 12% higher versus the lira at 8.0520, the sharpest move since August 2018 when Turkish markets were in another of their periodic crises.

The slide came after President Tayyip Erdogan shocked markets by replacing Turkey’s hawkish central bank governor with a critic of high interest rates.

“The authorities will be left with two choices, either it pledges to use interest rates to stabilise markets, or it imposes capital controls,” said Per Hammarlund, senior EM strategist at SEB Research.

“Given the increasingly authoritarian approach that President Erdogan has taken, capital controls are looking like the most likely choice.”

The uncertainty saw Japan’s Nikkei fall 1.6%, partly on speculation Japanese retail investors could face losses on large long positions in the high-yielding lira.

The ripples were more modest elsewhere with MSCI’s broadest index of Asia-Pacific shares outside Japan actually adding 0.3%, aided by a 0.7% rise in Chinese blue chips.

EUROSTOXX 50 futures eased 0.3% and FTSE futures 0.2%. Nasdaq futures firmed 0.6%, while S&P 500 futures dithered either side of flat.

Yields on 10-year Treasury notes edged down five basis points to 1.68%, suggesting some favoured safe havens.

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

Bonds had another wobble on Friday when the Federal Reserve decided not to extend a capital concession for banks, which could lessen their demand for Treasuries.

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

A host of Fed officials speak this week, including three appearances by Chair Jerome Powell, providing plenty of opportunity for more volatility in markets.

WATCHING EMERGING MARKETS

Monday’s tumble in the lira saw the yen firm modestly, with notable gains on the euro and Australian dollar. That in turn dragged the euro down slightly on the dollar to $1.1890.

After an initial slip, the dollar soon steadied at 108.80 yen, while the dollar index was down slightly at 91.973.

Also supporting the yen were concerns Japanese retail investors that have built long lira positions, a popular trade for the yield-hungry sector, might be squeezed out and trigger another round of lira selling.

Still, analysts at Citi doubted that the episode would lead to widespread pressure on emerging markets, noting the last time the lira slid in 2020, there was little spillover.

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

There was scant sign of safe-haven demand for gold, which eased 0.2% to $1,741 an ounce.

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

Brent was off 32 cents at $64.21 a barrel, while U.S. crude for May fell 33 cents to $61.10.

Asia stocks hesitant as bonds boosted by Turkish tumult

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like

Uncategorized

Neque porro quisquam est, qui dolorem ipsum quia dolor sit amet, consectetur, adipisci velit, sed quia non numquam eius modi tempora incidunt.

Uncategorized

Nemo enim ipsam voluptatem quia voluptas sit aspernatur aut odit aut fugit, sed quia consequuntur magni dolores eos qui ratione.

Uncategorized

Quis autem vel eum iure reprehenderit qui in ea voluptate velit esse quam nihil molestiae consequatur, vel illum qui dolorem eum.

Uncategorized

Neque porro quisquam est, qui dolorem ipsum quia dolor sit amet, consectetur, adipisci velit, sed quia non numquam eius modi tempora.

Disclaimer: Wisegazette.com it's managers and its employees (collectively "The Company") do not make any guarantee or warranty about what is advertised or above. Information provided by this website is for research purposes only and should not be considered as personalized financial or health advice. Copyright © 2021 Wise Gazette. All Rights Reserved