Stocks dive, euro falls, as Turkey turmoil ripples outEuropost
A plummeting Turkish lira sent ripples through global equities and emerging markets on Friday, as rising fears of a wider fallout sent investors scurrying for the safety of assets such as the yen and US government bonds. The lira fell as much as 12% against the dollar earlier in the day, its worst day since Turkey’s financial crisis of 2001, on the back of a deepening rift with the United States, worries about its own economy and lack of action from policymakers.
The currency is down more than 35% this year, its losses accelerating as the dollar jumped to 13-month highs. That is spreading fear of an impact on other economies and markets - bank shares across the continent fell and the euro slipped to its lowest since July 2017 as the Financial Times quoted sources as saying the European Central Bank was concerned about European banks’ exposure to Turkey. Shares in France’s BNP Paribas, Italy’s UniCredit and Spain’s BBVA, the banks seen as most exposed to Turkey, fell as much as 4%. That took European bank shares down 1.3% while the pan-European STOXX 600 index fell 0.7%.
President Tayyip Erdogan pledged on Friday to defend Turkey against economic attacks and said increasing production, exports and employment was the best response to the country’s challenges.
Speaking to a crowd in the northeastern city of Bayburt, Erdogan said Turkey was facing artificial financial volatility, but that people who get excited about interest rates and foreign exchange prices would not win. The lira weakened after his comments.
Adding to emerging market currency woes was the Russian rouble, weakened to 67.12 to the dollar. Overnight it had retreated to its lowest since November 2016 on threats of new US sanctions, weakening beyond the psychologically important 65-per-dollar threshold.