Turkish lira sinks to record low as monetary policy queried
Trump casts uncertainty on N. Korea talks, unnerving investors
Shares in Europe followed Asian counterparts lower as storm clouds gathered from Turkey to North Korea and data cast doubts on economic growth prospects for the euro area. Treasuries advanced with the dollar, while oil dropped with most commodities.
The Stoxx Europe 600 Index sank by the most in two months alongside U.S. equity-index futures, as optimism over U.S.-China trade talks faded together with prospects for President Donald Trump’s summit with North Korea’s leader. Concerns over Turkey’s financial-market stability drove the lira to successive record lows and weighed on emerging-market assets. The yen and core European bonds gained with gold as traders sought havens after equity benchmarks from Hong Kong to Sydney declined.
The euro fell to a six-month trough as manufacturing data added toconcern economic momentum is slowing, while the pound weakened and gilts climbed as U.K. inflation undershot expectations, denting prospects for rate increases.
Gloom is returning to global markets just as trade tensions between the U.S. and China appeared to be easing. U.S. stocks closed down Tuesday after Trump introduced uncertainty on a meeting with Kim Jong Un, while in Italy questions are swirling around the suitability of the nominated prime minister. Monetary policy may provide a welcome distraction when the Federal Reserve releases minutes of its latest policy meeting on Wednesday.
“If you look at history, you find that geopolitics does rattle markets,” Vasu Menon, OCBC Bank vice president, told Bloomberg Television. “The markets are clearly quite nervous because we’ve had a good run and this is an excuse for the markets to take a breather.”
Terminal users can read more in Bloomberg’s Markets Live blog.
These are some key events to watch this week:
- The Federal Reserve releases minutes of the central bank’s May 1-2 meeting on Wednesday; U.S. new home sale are due as are euro-area PMIs.
- Thursday sees the Bank of England Markets Forum at Bloomberg London. Speakers include BOE Governor Mark Carney and New York Fed President William Dudley.
- At the St. Petersburg Forum Friday, Russian President Vladimir Putin and French President Emmanuel Macron, IMF Managing Director Christine Lagarde, and Japan Prime Minister Shinzo Abe participate on a panel moderated by Bloomberg News Editor-in-Chief John Micklethwait.
- Also Friday, European Union finance ministers discuss the latest on Brexit talks, in Brussels.
These are the main moves in markets:
- The Stoxx Europe 600 Index sank 1 percent as of 10:15 a.m. London time, the lowest in more than a week on the biggest tumble in two months.
- The U.K.’s FTSE 100 Index sank 0.7 percent.
- Germany’s DAX Index sank 1.5 percent.
- The MSCI Asia Pacific Index fell 0.3 percent to the lowest in two weeks.
- Futures on the S&P 500 Index fell 0.7 percent.
- The Bloomberg Dollar Spot Index rose 0.2 percent.
- The euro fell 0.4 percent to $1.1735, the weakest in six months.
- The British pound sank 0.5 percent to $1.3364, the weakest in five months.
- The Japanese yen surged 1 percent to 109.77 per dollar, the strongest in more than a week on the largest jump in 19 weeks.
- The yield on 10-year Treasuries decreased four basis points to 3.02 percent, the lowest in more than a week.
- Germany’s 10-year yield dipped five basis points to 0.51 percent, the lowest in five weeks.
- Britain’s 10-year yield decreased seven basis points to 1.523 percent, the largest tumble in two months.
- Japan’s 10-year yield sank one basis point to 0.046 percent, the lowest in more than two weeks on the biggest tumble in more than three weeks.
- West Texas Intermediate crude decreased 0.5 percent to $71.85 a barrel, the biggest dip in more than a week.
- Gold jumped 0.2 percent to $1,294.20 an ounce.
- LME copper sank 2.1 percent to $6,831.00 per metric ton, the lowest in a week on the biggest tumble in almost four weeks.
By Robert Brand
May 23, 2018, 7:31 PM GMT+10
— With assistance by Sarah Ponczek, Michael G Wilson, and Andreea Papuc