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| Turkish lira rallies as Qatar invests $15bn, but markets slide - as it happened | |
| (35 minutes later) | |
| Time for a recap: | |
| Qatar has come to Turkey’s aid today, pledging to invest $15bn in the country to help it ride out its currency crisis. The offer came as Turkish president Erdoğan hosted Sheikh Tamim bin Hamad Al-Thani, emir of the Gulf state (photos). | |
| Analysts believe the move will help Turkey ride out the crisis - with the money committed to helping the financial sector. In the long run, though, many investors are looking for conventional measures such as an interest rate hike. | |
| Turkey has escalated the diplomatic row with the US today, by slapping hefty tariffs on American imports. Cars, spirits and beauty products will all become much more expensive, as Ankara retaliates against America’s metals tariffs. | |
| Turkey has also taken steps to prevent traders betting against its currency. Financial regulators tightens the rules around foreign exchange derivatives, making it harder to ‘short’ the lira. | |
| After days of heavy losses, the lira has staged a recovery. The currency has gained over 5% today to trade around 6 lira to the US dollar, compared with a record low of 7 earlier this week. | |
| Fiona Cincotta of City Index says: | |
| The limits on shorting the Lira taken by Ankara have halted the slide in the currency, which has firmed over 4% after its 20% decline, easing contagion fears and cooling the threat on financials. | |
| Whilst this is a short-term measure, its doing the trick for now. However, it was the more confrontational move by Ankara to raise tariffs on American cars, alcohol, cigarettes, escalating tensions with the US that has caught the market’s attention and increased flows into safe havens such as the Japanese Yen and Swiss Franc. | |
| Financial markets have indeed had a bad day. Shares fell across Europe, and commodity prices were hit by worries over emerging markets - including Turkey and China. | |
| Here’s our latest news story on the situation in Turkey: | |
| That’s all for today (unless any major news breaks tonight....) Thanks for reading and commenting. GW | |
| Political scientist Soner Cagaptay of the Washington Institute believes Qatar’s help could be crucial for Turkey. | |
| He also points out that Ankara stood with Doha during last year’s blockade drama; Erdoğan loyalty then could be paying off now (as explained earlier). | |
| Among the Middle East's most durable alliances TUR-QA: Qatar proves Turkey's lifeline, as Ankara has been Doha's in the GCC-Qatar split https://t.co/2zIlEPJVgF | |
| Big deal that could build investor confidence in Turkey, staving off potential economic collapse. The Qataris believe Turkish troop deployment saved them from Saudi-UAE invasion during the 2017 #Qatar-#GCC crisis. This may be how Qatar is paying back the favor #TurkeyCrisis https://t.co/tgUEYsrHGE | |
| With a dull clunk, the copper price has sunk into a bear market. It’s lost 20% of its value since June! | With a dull clunk, the copper price has sunk into a bear market. It’s lost 20% of its value since June! |
| Copper enters bear market pic.twitter.com/TeE9IUim10 | Copper enters bear market pic.twitter.com/TeE9IUim10 |
| So just how bad has today been for metals? Worst day since 2015? Nope. In aggregate the six LME base metals have dropped more than 25%, and they're heading for the biggest collective loss since 2011. 🤒 pic.twitter.com/Zsk0euPKK5 | So just how bad has today been for metals? Worst day since 2015? Nope. In aggregate the six LME base metals have dropped more than 25%, and they're heading for the biggest collective loss since 2011. 🤒 pic.twitter.com/Zsk0euPKK5 |
| Three factors are driving the markets down, says Charlie Robertson of Renaissance Capital -- the buoyant US dollar, America’s trade disputes, and the prospect of US interest rates going up. | Three factors are driving the markets down, says Charlie Robertson of Renaissance Capital -- the buoyant US dollar, America’s trade disputes, and the prospect of US interest rates going up. |
| He says (via Reuters) | He says (via Reuters) |
| “It is dollar strength, Trump’s trade wars and Fed tightening. They are an ugly combination for emerging markets.” | “It is dollar strength, Trump’s trade wars and Fed tightening. They are an ugly combination for emerging markets.” |
| Robertson is also cautious about Qatar’s pledge to invest $15bn in Turkey. When will we actually see the money, and will it be invested sensibly? | Robertson is also cautious about Qatar’s pledge to invest $15bn in Turkey. When will we actually see the money, and will it be invested sensibly? |
| The question is when. Total promised $5bn of investments in Iran, but is leaving a year later having actually spent just $50m. #Qatar could pick up cheap assets by investing quickly, but needs to be wary of looming corporate defaults and bank failures #Turkey https://t.co/pi6lExF3DC | The question is when. Total promised $5bn of investments in Iran, but is leaving a year later having actually spent just $50m. #Qatar could pick up cheap assets by investing quickly, but needs to be wary of looming corporate defaults and bank failures #Turkey https://t.co/pi6lExF3DC |
| After a rough day, Britain’s FTSE 100 has sunk to its lowest closing level since 26 April. | After a rough day, Britain’s FTSE 100 has sunk to its lowest closing level since 26 April. |
| The blue-chip index shed 113 points to 7497, a loss of 1.5%. | The blue-chip index shed 113 points to 7497, a loss of 1.5%. |
| Germany’s DAX closed 1.6% lower, while France lost 1.8%. | Germany’s DAX closed 1.6% lower, while France lost 1.8%. |
| Many developing markets also suffered losses today, which dragged emerging market shares into a bear market. | Many developing markets also suffered losses today, which dragged emerging market shares into a bear market. |
| The MSCI’s main EM equities index is down 2% today, and 20% lower than its recent peak in January. | The MSCI’s main EM equities index is down 2% today, and 20% lower than its recent peak in January. |
| Oliver Jones of Capital Economics blames worries about China, rather than Turkey: | Oliver Jones of Capital Economics blames worries about China, rather than Turkey: |
| While there has been comparatively little news on the Sino-US trade war in the past few days, the Chinese activity and credit data released earlier this week were weak. They confirmed that domestic headwinds – especially the ongoing slowdown in credit growth – are at least as big a threat to the country’s economy as US protectionism. | While there has been comparatively little news on the Sino-US trade war in the past few days, the Chinese activity and credit data released earlier this week were weak. They confirmed that domestic headwinds – especially the ongoing slowdown in credit growth – are at least as big a threat to the country’s economy as US protectionism. |
| In our view, these headwinds mean that China’s economy will continue to slow over the rest of this year. And this is a key reason why we think that EM [emerging market] assets will generally continue to struggle, regardless of what happens in Turkey. Countries that rely heavily on trade with China, most of whom are located in Emerging Asia, are probably particularly exposed. Alongside China itself, these countries dominate the main EM equity benchmarks, including the MSCI EM Index. | In our view, these headwinds mean that China’s economy will continue to slow over the rest of this year. And this is a key reason why we think that EM [emerging market] assets will generally continue to struggle, regardless of what happens in Turkey. Countries that rely heavily on trade with China, most of whom are located in Emerging Asia, are probably particularly exposed. Alongside China itself, these countries dominate the main EM equity benchmarks, including the MSCI EM Index. |
| Qatar’s move is a start, but not enough to rescue Turkey, says Mohamed A. El-Erian of financial services giant Allianz. | Qatar’s move is a start, but not enough to rescue Turkey, says Mohamed A. El-Erian of financial services giant Allianz. |
| #Bloomberg reporting #Qatar pledged $15 billion "in direct investments in #Turkey."This is part of the #Turkish government's strategy to avoid the #IMF by finding alternative external support.To be a sustainable stabilizer, funding needs to be larger and reach the central bank | #Bloomberg reporting #Qatar pledged $15 billion "in direct investments in #Turkey."This is part of the #Turkish government's strategy to avoid the #IMF by finding alternative external support.To be a sustainable stabilizer, funding needs to be larger and reach the central bank |
| BREAKING: Qatar has agreed to invest $15bn in Turkey, according to Turkish officials. | BREAKING: Qatar has agreed to invest $15bn in Turkey, according to Turkish officials. |
| This pledge follows the meeting between Qatari Emir Sheikh Tamim bin Hamad Al-Thani and President Recep Tayyip Erdoğan in Ankara today. | This pledge follows the meeting between Qatari Emir Sheikh Tamim bin Hamad Al-Thani and President Recep Tayyip Erdoğan in Ankara today. |
| The money will apparently be ‘channeled into Turkey’s financial markets and banks’. | The money will apparently be ‘channeled into Turkey’s financial markets and banks’. |
| The lira is strengthening following this announcement, now up 6% at 5.95 lira to the US dollar, from around 6.35 last night. | The lira is strengthening following this announcement, now up 6% at 5.95 lira to the US dollar, from around 6.35 last night. |
| Wall Street is also on the back foot, with the Dow Jones industrial average dropping by over 1%. | Wall Street is also on the back foot, with the Dow Jones industrial average dropping by over 1%. |
| Dow drops more than 300 points, dipping below 25K, as concerns about Turkey linger https://t.co/7yZqw5cRpu pic.twitter.com/xPyMm4Ed5k | Dow drops more than 300 points, dipping below 25K, as concerns about Turkey linger https://t.co/7yZqw5cRpu pic.twitter.com/xPyMm4Ed5k |
| The big picture today is that shares are down, commodity price are taking a hammering, and many currencies are losing ground against the US dollar. | The big picture today is that shares are down, commodity price are taking a hammering, and many currencies are losing ground against the US dollar. |
| France’s CAC index is having a particularly rough time, down 2%, with Germany and Portugal both down 1.8%. | France’s CAC index is having a particularly rough time, down 2%, with Germany and Portugal both down 1.8%. |
| Zinc is down over 6%, and oil has lost 2.5%, as traders fret that an emerging markets crisis will hurt growth. | Zinc is down over 6%, and oil has lost 2.5%, as traders fret that an emerging markets crisis will hurt growth. |
| David Madden of CMC Markets says dealers are worried about the currency crisis in Turkey, and the cooling of Chinese growth. | David Madden of CMC Markets says dealers are worried about the currency crisis in Turkey, and the cooling of Chinese growth. |
| European banks have lost ground today as investors are concerned the financial problems in Turkey could spread to the eurozone. | European banks have lost ground today as investors are concerned the financial problems in Turkey could spread to the eurozone. |
| Natural resource stocks like BHP Billiton, Rio Tinto, Randgold Resources and Glencore are all lower on the session as metals are under severe pressure. Copper, Platinum and Palladium are weaker as traders are concerned the Chinese economy is cooling, and yesterday’s disappointing fixed asset investment and industrial production reports from Beijing confirmed their fears. | Natural resource stocks like BHP Billiton, Rio Tinto, Randgold Resources and Glencore are all lower on the session as metals are under severe pressure. Copper, Platinum and Palladium are weaker as traders are concerned the Chinese economy is cooling, and yesterday’s disappointing fixed asset investment and industrial production reports from Beijing confirmed their fears. |
| The renminbi has been steadily losing ground versus the US dollar since March and it’s near its all-time-low, and that sums up the cautious sentiment surrounding China. | The renminbi has been steadily losing ground versus the US dollar since March and it’s near its all-time-low, and that sums up the cautious sentiment surrounding China. |
| Bank shares are also having a bad day, as Turkish contagion fears ripple. | Bank shares are also having a bad day, as Turkish contagion fears ripple. |
| European Financial stocks hit a 15-month low, down 13% year-to-date and 22% from their January high. $EUFN pic.twitter.com/z73UaVXSQc | European Financial stocks hit a 15-month low, down 13% year-to-date and 22% from their January high. $EUFN pic.twitter.com/z73UaVXSQc |
| It’s turning into a rough day in the City of London. | It’s turning into a rough day in the City of London. |
| The FTSE 100 index of top share is now down 121 points, or 1.6%, at 7490. That’s its lowest level since late April. | The FTSE 100 index of top share is now down 121 points, or 1.6%, at 7490. That’s its lowest level since late April. |
| Mining stocks are still being hit hard , with some natural resource giants down over 5%. The strong dollar is pushing commodity prices down, and there is also concern that global growth could be hit by the Turkish crisis. If emerging market countries are forced to raise interest rates to support their currencies, it could dampen demand. | Mining stocks are still being hit hard , with some natural resource giants down over 5%. The strong dollar is pushing commodity prices down, and there is also concern that global growth could be hit by the Turkish crisis. If emerging market countries are forced to raise interest rates to support their currencies, it could dampen demand. |
| Sterling is also being hurt by the dollar rally. The pound is down half a cent at $1.267, its lowest level in 14 months. | Sterling is also being hurt by the dollar rally. The pound is down half a cent at $1.267, its lowest level in 14 months. |
| Newsflash: Turkey’s president has held talks with German chancellor Angela Merkel. | Newsflash: Turkey’s president has held talks with German chancellor Angela Merkel. |
| The two leaders agreed to strengthen their bilateral ties, according to Turkish officials. | The two leaders agreed to strengthen their bilateral ties, according to Turkish officials. |
| Associated Press has more details: | Associated Press has more details: |
| Officials from Erdogan’s office said during their conversation on Wednesday the two leaders confirmed their commitment to maintaining high-level visits and contacts to strengthen cooperation. | Officials from Erdogan’s office said during their conversation on Wednesday the two leaders confirmed their commitment to maintaining high-level visits and contacts to strengthen cooperation. |
| They said that Turkish Treasury and Finance Minister Berat Albayrak would meet with his German counterpart, but did not provide a date. The two also discussed their planned meeting in Berlin at the end of next month, the officials said. | They said that Turkish Treasury and Finance Minister Berat Albayrak would meet with his German counterpart, but did not provide a date. The two also discussed their planned meeting in Berlin at the end of next month, the officials said. |
| Relations between Berlin and Ankara have been strained over the last couple of years. Erdoğan was angered when Germany blocked several rallies in the run-up to last year’s referendum, while Berlin protested when Die Welt reporter Deniz Yücel was imprisoned - for a year - on propaganda charges. | Relations between Berlin and Ankara have been strained over the last couple of years. Erdoğan was angered when Germany blocked several rallies in the run-up to last year’s referendum, while Berlin protested when Die Welt reporter Deniz Yücel was imprisoned - for a year - on propaganda charges. |
| Just in: Photos of the Emir of Qatar, Sheikh Tamim bin Hamad al-Thani, conducting his ‘working visit’ with Turkish president Recep Tayyip Erdoğan today: | Just in: Photos of the Emir of Qatar, Sheikh Tamim bin Hamad al-Thani, conducting his ‘working visit’ with Turkish president Recep Tayyip Erdoğan today: |