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| Turkish lira steadies despite threat of more US sanctions – business live | Turkish lira steadies despite threat of more US sanctions – business live |
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| Inflation in the eurozone has been confirmed at 2.1% in July – above the European Central Bank’s target of 2%. The annual rate rose from 2% in June, pushed up by higher energy costs, according to the European Union’s statistics office Eurostat. | |
| This means the ECB can push ahead with plans to end its bond purchasing programme by the end of the year, and possibly raise interest rates next year. | |
| Inflation was highest in Estonia (3.3%), Latvia and Belgium (both 2.7%), while Greece and Ireland posted the slowest inflation rates, of 0.8% and 1% respectively. Once all 28 EU countries are included, Romania had the highest inflation rate, of 4.3%. | |
| Mohamed El-Erian, chief economic adviser at Allianz, the parent of Pimco where he served as chief executive, and the former chairman of Barack Obama’s Global Development Council, writes: Can Turkey rewrite the rulebook for crises in emerging markets? By rejecting the conventional approach, Erdoğan risks greater trouble – and not just for Turkey. | |
| Whether by accident or design, Turkey is trying to rewrite the chapter on crisis management in the emerging-market playbook. Rather than opting for interest-rate hikes and an external funding anchor to support domestic policy adjustments, the government has adopted a mix of less direct and more partial measures – and this at a time when Turkey is in the midst of an escalating tariff tit-for-tat with the US, as well as operating in a more fluid global economy. How all this plays out is important not only for Turkey, but also for other emerging economies that already have had to cope with waves of financial contagion. | Whether by accident or design, Turkey is trying to rewrite the chapter on crisis management in the emerging-market playbook. Rather than opting for interest-rate hikes and an external funding anchor to support domestic policy adjustments, the government has adopted a mix of less direct and more partial measures – and this at a time when Turkey is in the midst of an escalating tariff tit-for-tat with the US, as well as operating in a more fluid global economy. How all this plays out is important not only for Turkey, but also for other emerging economies that already have had to cope with waves of financial contagion. |
| The initial phases of Turkey’s crisis were a replay of past emerging-market currency crises. A mix of domestic and external events – an over-stretched credit-led growth strategy; concerns about the central bank’s policy autonomy and effectiveness; and a less hospitable global liquidity environment, owing in part to rising US interest rates – destabilised the foreign-exchange market. | The initial phases of Turkey’s crisis were a replay of past emerging-market currency crises. A mix of domestic and external events – an over-stretched credit-led growth strategy; concerns about the central bank’s policy autonomy and effectiveness; and a less hospitable global liquidity environment, owing in part to rising US interest rates – destabilised the foreign-exchange market. |
| You can read the full article here. | You can read the full article here. |
| The euro is rising for a second day, heading towards $1.14, after coming under pressure on concerns over the exposure of major European banks to Turkey, after the lira went into meltdown. | The euro is rising for a second day, heading towards $1.14, after coming under pressure on concerns over the exposure of major European banks to Turkey, after the lira went into meltdown. |
| There is a sense of relief in financial markets today, following the news that Beijing will resume trade talks with Washington next week, although at a lower level than previously. It is the first round of trade talks since June and offers some hope to those worried about the impact of the tit-for-tat trade war on the world economy. | There is a sense of relief in financial markets today, following the news that Beijing will resume trade talks with Washington next week, although at a lower level than previously. It is the first round of trade talks since June and offers some hope to those worried about the impact of the tit-for-tat trade war on the world economy. |
| Lukman Otunuga, research analyst at FXTM, said: | Lukman Otunuga, research analyst at FXTM, said: |
| Although the chances of a breakthrough deal from lower-level talks are seen as unlikely, the meeting could be a positive step towards easing trade tensions between the world’s two largest economies. | Although the chances of a breakthrough deal from lower-level talks are seen as unlikely, the meeting could be a positive step towards easing trade tensions between the world’s two largest economies. |
| The Turkish lira has staged a remarkable recovery since Monday’s meltdown when it hit a record low below 7.23 to the dollar. The currency is currently trading at 5.79, up 0.4% on the day. | The Turkish lira has staged a remarkable recovery since Monday’s meltdown when it hit a record low below 7.23 to the dollar. The currency is currently trading at 5.79, up 0.4% on the day. |
| While the Turkish authorities have been criticised for adopting half-measures, the lira was thrown a lifeline on Wednesday when Qatar pledged to shore up Turkey’s shaky finances with loans worth $15bn. | While the Turkish authorities have been criticised for adopting half-measures, the lira was thrown a lifeline on Wednesday when Qatar pledged to shore up Turkey’s shaky finances with loans worth $15bn. |
| Yesterday, finance minister Albayrak managed to calm nerves during a conference call with thousands of investors, although this was later marred by news from Washington that Turkey faces more sanctions if the US paster Andrew Brunson is not freed. | Yesterday, finance minister Albayrak managed to calm nerves during a conference call with thousands of investors, although this was later marred by news from Washington that Turkey faces more sanctions if the US paster Andrew Brunson is not freed. |
| It’s pretty quiet on the corporate front as well. Royal Bank of Scotland has announced that its deputy chief financial officer Katie Murray will stand in as interim finance chief after Ewen Stevenson leaves on 30 September to go to HSBC on a £10.6m deal. | It’s pretty quiet on the corporate front as well. Royal Bank of Scotland has announced that its deputy chief financial officer Katie Murray will stand in as interim finance chief after Ewen Stevenson leaves on 30 September to go to HSBC on a £10.6m deal. |
| A search for a successor for Stevenson is under way, RBS said. | A search for a successor for Stevenson is under way, RBS said. |
| The FTSE 100 index in London has opened flat, trading down 2.5 points at 7553.84. Germany’s Dax is also flat, France’s CAC is up 0.1%, Spain’s Ibex has gained 0.2% and Italy’s FTSE MiB has slipped 0.1%. | The FTSE 100 index in London has opened flat, trading down 2.5 points at 7553.84. Germany’s Dax is also flat, France’s CAC is up 0.1%, Spain’s Ibex has gained 0.2% and Italy’s FTSE MiB has slipped 0.1%. |
| Viraj Patel, foreign exchange strategist at ING, expects the lira to “tread water” today – with US-Turkey relations on a knife-edge as the White House said it may increase sanctions. Next week’s market holiday should offer some respite – the Istanbul stock exchange will be closed from Tuesday until Friday for Eid al-Adha. | Viraj Patel, foreign exchange strategist at ING, expects the lira to “tread water” today – with US-Turkey relations on a knife-edge as the White House said it may increase sanctions. Next week’s market holiday should offer some respite – the Istanbul stock exchange will be closed from Tuesday until Friday for Eid al-Adha. |
| Patel adds: | Patel adds: |
| All the noise from Turkey’s finance minister Albayrak appeared to be on the right lines in terms of reassuring global investors that Ankara remains credibly committed to addressing the country’s inflation problem – and in the status quo free-market spirit. In effect, Turkish policymakers have bought themselves a bit of time – at least until early September, when markets will be expecting to see some sort of joint fiscal and monetary tightening in the Medium-Term Economic Plan. | All the noise from Turkey’s finance minister Albayrak appeared to be on the right lines in terms of reassuring global investors that Ankara remains credibly committed to addressing the country’s inflation problem – and in the status quo free-market spirit. In effect, Turkish policymakers have bought themselves a bit of time – at least until early September, when markets will be expecting to see some sort of joint fiscal and monetary tightening in the Medium-Term Economic Plan. |
| While we did see Turkey’s sovereign CDS rally following the finance minister’s investor call, the lira failed to push on much further beyond 5.75 – as markets had largely priced in a conciliatory outcome. S&P are due to downgrade Turkey’s sovereign credit rating today – but again this is in the price of the currency. | While we did see Turkey’s sovereign CDS rally following the finance minister’s investor call, the lira failed to push on much further beyond 5.75 – as markets had largely priced in a conciliatory outcome. S&P are due to downgrade Turkey’s sovereign credit rating today – but again this is in the price of the currency. |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| The Turkish lira has become volatile again at the end of a tumultuous week, after the United States warned of more sanctions against Turkey. The embattled currency weakened in early London trading, with one dollar buying 5.86 lira, but has just recovered to 5.8, up 0.26%. On Monday the lira hit a record low of 7.2, dragging down other emerging markets currencies. | The Turkish lira has become volatile again at the end of a tumultuous week, after the United States warned of more sanctions against Turkey. The embattled currency weakened in early London trading, with one dollar buying 5.86 lira, but has just recovered to 5.8, up 0.26%. On Monday the lira hit a record low of 7.2, dragging down other emerging markets currencies. |
| Turkey’s finance minister sparked a recovery in the lira yesterday after he addressed thousands of international investors on a conference call. Berat Albayrak, the son-in-law of president Recep Tayyip Erdoğan, pledged to protect beleaguered local banks and cut public spending to prevent the country defaulting on its loans. | Turkey’s finance minister sparked a recovery in the lira yesterday after he addressed thousands of international investors on a conference call. Berat Albayrak, the son-in-law of president Recep Tayyip Erdoğan, pledged to protect beleaguered local banks and cut public spending to prevent the country defaulting on its loans. |
| But a few hours later US Treasury secretary Steven Mnuchin assured president Donald Trump at a cabinet meeting that sanctions were ready to be put in place if US pastor Andrew Brunson, who is on house arrest in Turkey over terrorism charges, is not released. | But a few hours later US Treasury secretary Steven Mnuchin assured president Donald Trump at a cabinet meeting that sanctions were ready to be put in place if US pastor Andrew Brunson, who is on house arrest in Turkey over terrorism charges, is not released. |
| Trump later tweeted that the US “will pay nothing” for the release “but we are cutting back on Turkey!”. | Trump later tweeted that the US “will pay nothing” for the release “but we are cutting back on Turkey!”. |
| Credit rating agency Standard & Poor’s is expected to downgrade Turkey’s sovereign credit rating later today. | Credit rating agency Standard & Poor’s is expected to downgrade Turkey’s sovereign credit rating later today. |
| Turkey has taken advantage of the United States for many years. They are now holding our wonderful Christian Pastor, who I must now ask to represent our Country as a great patriot hostage. We will pay nothing for the release of an innocent man, but we are cutting back on Turkey! | Turkey has taken advantage of the United States for many years. They are now holding our wonderful Christian Pastor, who I must now ask to represent our Country as a great patriot hostage. We will pay nothing for the release of an innocent man, but we are cutting back on Turkey! |
| Asian stock markets rose overnight, heartened by news that Beijing and Washington agreed to hold their first trade talks since June next week. Japan’s Nikkei advanced 0.35% while Hong Kong’s Hang Seng the Australian stock market both rose 0.2%, although the Shanghai stock exchange lost 1.3%. | Asian stock markets rose overnight, heartened by news that Beijing and Washington agreed to hold their first trade talks since June next week. Japan’s Nikkei advanced 0.35% while Hong Kong’s Hang Seng the Australian stock market both rose 0.2%, although the Shanghai stock exchange lost 1.3%. |
| The MSCI index of world stocks rose 0.6% yesterday, its biggest gain in a month. | The MSCI index of world stocks rose 0.6% yesterday, its biggest gain in a month. |
| European shares are expected to be pretty flat when they open at 8am BST. | European shares are expected to be pretty flat when they open at 8am BST. |
| The Agenda | The Agenda |
| 10am BST Eurozone inflation for July | 10am BST Eurozone inflation for July |
| 3pm BST US University of Michigan consumer sentiment for August | 3pm BST US University of Michigan consumer sentiment for August |