The situation in Turkey sent global stock indices lower

  • 14 Aug 2018

    The situation in Turkey sent global stock indices lower

    After moving mostly higher early in the session, stocks pulled back over the course of the trading day on Monday. With the downturn on the day, the major averages are adding to the losses posted last Friday. The Dow Jones industrials were down 0.5 percent, the S&P lost 0.4 percent and the Nasdaq was 0.25 percent lower on the day. Global contagion of market jitters arising from the plunge of Turkey’s currency spread to the US — financial stocks bore the brunt of the concerns over Turkey.

    US markets

    After moving mostly higher early in the session, stocks pulled back over the course of the trading day on Monday. With the downturn on the day, the major averages are adding to the losses posted last Friday. The Dow Jones industrials were down 0.5 percent, the S&P lost 0.4 percent and the Nasdaq was 0.25 percent lower on the day. Global contagion of market jitters arising from the plunge of Turkey currency spread to the US ?financial stocks bore the brunt of the concerns over Turkey.

    A pledge by the Central Bank of Turkey to stabilize the falling lira failed to quell investor worries. The currency remained under pressure, having dropped 40 percent against the US dollar so far this year. The downturn by stocks reflected lingering concerns about the Turkish economy and the recent sell-off by the country's currency. The Turkish lira hit a new record low against the US dollar in Asian trading before regaining some ground after Turkey's central bank took measures to boost liquidity in the foreign exchange market.

    Citigroup, Bank of America, Wells Fargo and JPMorgan Chase all retreated. Apple helped the tech sector advance, its shares hitting an all-time high. Amazon.com also hit a record high. Netflix declined after it announced the departure of Chief Financial Officer David Wells. Harley-Davidson was lower after President Donald Trump tweeted support for a boycott against the company. Rite Aid declined to more than a five-year low, extending its losses after the retail drugstore chain ended its Albertsons merger.

    Tesla advanced after Chief Executive Elon Musk said he is in discussions with Saudi Arabia sovereign wealth fund and other potential backers of his plan to take the electric car-maker private, but he said financing has not been nailed down yet. Nielsen Holdings jumped after activist hedge fund Elliott Management disclosed it had taken a stake in the media and consumer research company.

    These data reflect observations at 4:00 PM US ET. Gold was down US$18.60 to US$1,200.40. Copper futures were down 0.42 percent to US$2.73. WTI spot crude was down 31 US cents to US$67.32. Dated Brent spot crude was down 5 US cents to US$72.76. The US dollar was up against the euro, pound and the Canadian and Australian dollars. It retreated against the yen and Swiss franc. The Dollar Index was up 0.13 percent. The yield on the US Treasury 30 year bond was up 1 basis point to 3.04 percent. The 10 year note was also up 1 basis point at 2.88 percent.

    European markets

    European stock indices retreated Monday. Investor sentiment continued to be dragged down by concerns over the currency crisis in Turkey and the fear of contagion. The Turkish lira hit a new record low against the US dollar in Asian trading before regaining some ground after Turkey's central bank took measures to boost liquidity in the foreign exchange market. Over the weekend, Turkish Finance Minister Berat Albayrak announced government plans to calm the highly volatile financial markets. The FTSE and SMI were down 0.3 percent, the DAX declined 0.5 percent and the CAC slipped 2.36 points.

    United Internet advanced after it confirmed its 2018 guidance after reporting a 32.4 percent rise in second quarter core profit. Salzgitter Group declined after the company posted strong first-half results and backed its FY18 outlook but warned of a rise in imports into the European Union. Air France KLM retreated after Dutch pilots threatened further strikes if pay talks with management don't resume before Friday. TUI was lower and packaging group Mondi declined after a fresh slump in Turkey's lira. Clarkson jumped after the company said trading conditions improved in the second quarter.

    Ocean Wilsons Holdings sank after the Bermuda-based investment company reported weak profits in its first half with lower revenues. GAM Holding dropped 3 after the money manager said it would liquidate some funds run by a suspended fund manager. Roche declined after the company's Genentech unit received a breakthrough therapy designation from the US FDA for Xolair, for the prevention of severe allergic reactions following accidental exposure to one or more foods in people with allergies. Novartis slipped while Nestle edged higher. Cr嶮it Suisse, UBS and Julius Baer finished lower. Turkish-exposed banks BBVA, Unicredit and BNP Paribas retreated.

    Asia Pacific Markets

    Asian stocks tumbled Monday as turmoil in Turkey and the lira's free-fall triggered fears of contagion. Tensions between the US and Turkey have been on the rise due to Turkish detention of U.S. pastor Andrew Brunson and Trump's move to double metals tariffs on Turkey.

    The Shanghai Composite was down 0.3 percent while the Hang Seng declined 1.5 percent. Mainland Chinese shares were helped by gains in the technology sector on hopes of a policy boost from Beijing.

    The Nikkei and Topix dropped 2.0 percent and 2.1 percent respectively, hitting a one-month low. The yen was firmer thanks to concerns that the financial crisis in Turkey will have a spill over effect on the global economy. Banks Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group retreated amid the deepening US-Turkey trade rift. Automakers Toyota, Mazda Motor, Honda Motors and Isuzu Motors also dropped along with tech stocks such as Tokyo Electron and Screen Holdings declined.

    The S&P/ASX and All Ordinaries both declined 0.4 percent. A fall in commodity prices on worries about geopolitical tensions pulled down mining stocks. BHP Billiton, Rio Tinto, Fortescue Metals Group and South32 retreated. The big four banks also closed lower ahead of quarterly updates later in the week. Oil Search, Origin Energy and Santos gained after oil prices rose over 1 percent on Friday on worries about tightening supplies.

    The Kospi lost 1.5 percent as investors fretted about fallouts from Turkey's currency crisis. The Sensex was 0.6 percent lower.

    Looking forward

    China releases July industrial production and retail sales. France releases second quarter ILO unemployment data. Germany posts second quarter gross domestic product flash and August ZEW survey. The UK releases July labour market report. The Eurozone also posts second quarter gross domestic product second quarter flash and June industrial production. In the US, NFIB small business optimism for August will be posted along with July import/export prices.

    Global Stock Markets
      End 2018DailyPercent Change
     Index2017Aug 10Aug 13ChangeDaily2018Yr/Yr
    North America                
    United States Dow 24719.22 25313.14 25187.70 -125.44 -0.5 1.9 14.5
      NASDAQ 6903.39 7839.11 7819.71 -19.40 -0.2 13.3 23.3
      S&P 500 2673.61 2833.28 2821.93 -11.35 -0.4 5.5 14.4
    Canada S&P/TSX Comp 16209.13 16326.51 16250.75 -75.76 -0.5 0.3 7.5
                     
    Europe                
    UK FTSE 100 7687.77 7667.01 7642.45 -24.56 -0.3 -0.6 3.9
    France CAC 5312.56 5414.68 5412.32 -2.36 0.0 1.9 5.7
    Germany XETRA DAX 12917.64 12424.35 12358.74 -65.61 -0.5 -4.3 1.6
    Italy MIB 21853.34 21090.78 20969.26 -121.52 -0.6 -4.0 -3.5
    Spain Ibex 35 10043.90 9602.10 9530.40 -71.70 -0.7 -5.1 -8.9
    Sweden OMX Stockholm 30 1576.94 1616.82 1611.80 -5.02 -0.3 2.2 3.7
    Switzerland SMI 9381.87 9031.33 9005.35 -25.98 -0.3 -4.0 -0.3
                     
    Asia/Pacific                
    Australia All Ordinaries 6167.29 6366.81 6341.25 -25.56 -0.4 2.8 9.7
    Japan Nikkei 225 22764.94 22298.08 21857.43 -440.65 -2.0 -4.0 11.9
      Topix 1817.56 1720.16 1683.50 -36.66 -2.1 -7.4 5.3
    Hong Kong Hang Seng 29919.15 28366.62 27936.57 -430.05 -1.5 -6.6 2.5
    S. Korea Kospi 2467.49 2282.79 2248.45 -34.34 -1.5 -8.9 -3.7
    Singapore STI 3402.92 3284.78 3245.34 -39.44 -1.2 -4.6 -1.9
    China Shanghai Comp 3307.17 2795.31 2785.87 -9.44 -0.3 -15.8 -13.9
    Taiwan TAIEX 10642.86 10983.68 10748.92 -234.76 -2.1 1.0 5.1
    India Sensex 30 34056.83 37869.23 37644.90 -224.33 -0.6 10.5 19.7

    Data Source — Haver Analytics

    Bond markets
    10-Yr Govt BondsClosing YieldChange Yield (bp)
    US 2.88% 1
    UK 1.25% 1
    Germany 0.31% -1
    Japan 0.09% 0
    Australia 2.58% -1

    Source — Bloomberg

    Currencies and commodities
    CurrencyAugust 10August 13Change (%)
    Japanese yen 110.8300 110.6600 0.2%
    Australian dollar 0.7296 0.7262 -0.5%
    Yuan 6.8467 6.8912 -0.6%
    Euro 1.1404 1.1394 -0.1%
    British pound 1.2766 1.2753 -0.1%
    Swiss franc 0.9956 0.9934 0.2%
    Canadian dollar 0.7618 0.7613 -0.1%

    Source — Bloomberg 

    CommoditiesAugust 13Change
    Brent Spot $72.76 -0.07%
    Gold $1,200.40 ($18.60)
    Thompson-Reuters/ Jeffreys Commodity index 195.48 -0.71%

    Source — Bloomberg