National Post (National Edition)
STOCKS RALLY AFTER TURKEY LIRA SCARE.
Markets halted their longest slide in weeks Tuesday as investors brushed off Monday’s Turkey-induced turmoil.
The Turkish lira steadied as officials from Turkey and the U.S. said the countries are in talks to ease diplomatic tensions, which have resulted in high tariffs on Turkish steel and aluminum. Stocks in emerging markets such as Argentina, Russia and Brazil jumped.
Canada’s main stock index closed higher on broad gains as investor concerns looked to ease.
“The sharp reaction over the last few days probably got ahead of itself, and the lack of more bad news was enough to ease some of the fears,” said Craig Jerusalim, portfolio manager at CIBC Asset Management.
The S&P/TSX composite lost 166.23 points on Friday’s and Monday’s declines, but regained some of that Tuesday with a 79.92 point climb to close at 16,330.67. The index had an intraday high of 16,341.97 and 187.16 million shares traded hands.
In the U.S., the biggest gains went to small and midsize companies, which do more business domestically compared to the large multinational firms on indexes like the S&P 500 and the Dow Jones Industrial Average. Retailers rose, thanks in part to strong quarterly reports.
The S&P 500 index climbed 18.03 points, or 0.6 per cent, to 2,839.96. The Dow Jones Industrial Average gained 112.22 points, or 0.4 per cent, to 25,299.92. The Nasdaq composite added 51.19 points, or 0.7 per cent, to 7,870.89. The Russell 2000 index advanced 17.26 points, or 1 per cent, to 1,692.58.
The S&P 500 fell a combined 1.1 per cent Friday and Monday as investors worried that Turkey’s financial woes would affect other countries.
The reduced tensions with Turkey also stopped a rally in bond prices and sent yields and interest rates higher. That helped banks. Industrial and basic materials companies also rose Tuesday, but compared to other parts of the market, they didn’t recover as much of their losses.
Invesco chief global market strategist Kristina Hooper said investors are shifting money into more U.s.-focused companies in response to the Trump administration’s aggressive handling of its dispute with Turkey, a longtime member of NATO.
“This is a reminder that the U.S. is a very different country than it was just a few years ago,” she said.
Economists say Turkey’s central bank still needs to raise interest rates significantly to strengthen its currency. President Recep Tayyip Erdogan has ruled out that step.
Hooper said it’s common for stocks to fall across emerging markets when one country is in trouble, but that reaction isn’t necessarily justified.
“What we’re seeing in emerging markets today is a repeat of what we’ve seen crisis after crisis for the last few decades,” Hooper said. “We can’t treat all emerging markets the same way.”
She said Argentina, like Turkey, is dealing with a plunging currency and political turmoil. But most of Turkey’s problems are specific to that country and other emerging markets like Mexico are likely to recover.
The Turkish currency also climbed after officials from Turkey and the U.S. said the countries are in talks to ease diplomatic tensions, while overall fears of the crisis spreading to other emerging markets has eased, said CIBC’S Jerusalim.
“The lira is clawing back some of its declines from the last few days. Hopefully that means some of the contagion risks have abated, but it’s a fluid situation and its very tough to predict.”
Global financial concerns have historically helped the gold sector, but it’s seen little affection lately with a US$20 plunge Monday that sent stocks in the sector down. The metal regained only a fraction of that loss with a US$1.80 climb Tuesday for the December gold contract to close at US$1,200.70 an ounce.
The drop in the gold price came as investors fled to the U.S. dollar for safety instead, but the lack of support is still surprising, said Jerusalim.
“It’s largely U.S. dollar strength, and it’s been a little baffling considering all the global risks out there and trade concerns and emerging market concerns.”