World equities rattled by Turkey currency woes; crude prices slip

Gold hits 17-month low as investors seek refuge in dollar

NEW YORK, Aug 13, ( Agencies): Turkey’s worsening currency crisis sent world equities lower and cut into the value of emerging market stocks and currencies Monday, while boosting the prices of German bonds and other stable assets.

The MSCI world equity index, which tracks shares in 47 countries, was down 0.7 percent and 1.7 percent since Friday’s open as the Turkish lira plunged to a record low, forcing the country’s finance minister to announce an economic action plan to ease nerves.

The lira has tumbled on worries over President Tayyip Erdogan’s increasing control over the economy and deteriorating relations with the United States. It fell as much as 12 percent at one stage on Monday, then recovered to a loss of 8.5 percent.

Emerging market stocks lost 2.11 percent.

The Dow Jones Industrial Average fell 98.08 points, or 0.39 percent, to 25,215.06, the S&P 500 lost 7.19 points, or 0.25 percent, to 2,826.09 and the Nasdaq Composite dropped 9.43 points, or 0.12 percent, to 7,829.68 in early afternoon trading.

The euro fell to a one-year low against the dollar on Monday and sank to a one-year trough against the Swiss franc as well.

European stocks fell on Monday, with a pan-European index of shares down 0.3 percent and the banking stock index as much as 2.6 percent lower.

The pan-European FTSEurofirst 300 index lost 0.31 percent.

Safe-haven government bonds were in demand, with yields on German 10-year debt, the benchmark for the eurozone, dropping to a onemonth low.

US crude fell 2.29 percent to $66.08 per barrel and Brent was last at $71.53, down 1.76 percent on the day. Spot gold dropped 1.5 percent to $1,192.43 an ounce. US gold futures fell 1.59 percent to $1,199.60 an ounce.

US

US stock indexes fell on Monday as a plummeting Turkish lira weighed on shares of big US lenders, but losses on the Nasdaq were limited by high-flying companies such as Apple and Amazon that hit record highs.

The financials slipped 0.63 percent as US bank stocks, like its European counterparts, bore the brunt of investor worries over exposure to Turkey’s crisis.

Shares of Citigroup, Bank of America, Wells Fargo and JP Morgan were down between 0.7 percent and 1 percent.

The lira has tumbled more than 40 percent https://reut.rs/2vFv6Ue against the dollar this year on worries over President Tayyip Erdogan’s increasing control over the economy and deteriorating relations with the United States.

The technology sector rose 0.18 percent and was the only S&P sector to be trading higher.

Apple’s shares jumped as much as 1.6 percent to hit a record high of $210.95 and Amazon.com rose as much as 2.1 to an all-time high of $1,925, while Google-parent Alphabet gained 0.2 percent.

At 12:38 am EDT the Dow Jones Industrial Average was down 101.99 points, or 0.40 percent, at 25,211.15, the S&P 500 was down 6.94 points, or 0.24 percent, at 2,826.34 and the Nasdaq Composite was down 5.08 points, or 0.06 percent, at 7,834.03.

Among stocks, Harley Davidson fell 4 percent after President Donald Trump backed boycotting American motorcycle manufacturer.

Netflix’s shares dipped 0.5 percent and was the only one of the FAANG stocks trading lower, after the video streaming service provider said its Chief Financial Officer David Wells plans to step down.

Nielsen Holdings jumped 9.2 percent, the most on the S&P 500, after activist investor Elliott Management disclosed a stake and said would push for a sale of the TV-ratings company.

VF Corp dropped 3.9 percent after the apparel maker decided to spin off Lee and Wrangler jeans into a separate public company.

Declining issues outnumbered advancers for a 2.33-to-1 ratio on the NYSE and for a 1.98-to-1 ratio on the Nasdaq.

The S&P index recorded 11 new 52-week highs and eight new lows, while the Nasdaq recorded 55 new highs and 90 new lows.

Europe

Banks dragged European shares down on Monday as the Turkish currency crisis shook investor confidence in lenders exposed to the country, while pharmaceuticals group Bayer sank 11 percent after its subsidiary Monsanto lost a key lawsuit.

The pan-European STOXX 600 fell 0.2 percent and closed at a threeweek low, with Germany’s DAX down 0.4 percent as pharmaceuticals group Bayer weighed.

Bayer was the worst performer, sinking 10.8 percent after Monsanto, the US agriculture giant it acquired in June, was ordered to pay damages in a lawsuit alleging its glyphosate weedkiller caused a man’s cancer.

Bayer’s shares were set for their biggest one-day fall in more than nine years.

Euro zone bank stocks fell 1.8 percent and touched levels not seen since December 2016 during trading.

Turkish-exposed banks BBVA, Unicredit, and BNP Paribas fell 3.2 percent, 2.6 percent and 1.1 percent.

Deutsche Bank shares fell 2 percent after Bank of America Merrill Lynch downgraded the stock to “underperform”. Ingenico shares also suffered a 1.7 percent fall after a BAML downgrade to “underperform”.

Air France KLM shares tumbled 4.1 percent after its biggest pilots’ union said over the weekend further strikes were possible if pay talks with management did not resume.

Travel and leisure stocks fell 0.5 percent as Air France weighed and the deepening crisis in Turkey sapped investors’ appetite for companies involved in tourism in the country.

Shares in asset manager GAM fell 3.7 percent after it said it would liquidate nine funds whose trading it halted last month, after suspending the investment director who ran them.

Asia

Asian markets tumbled and the Turkish lira dived almost eight percent Monday on fears that the economic crisis gripping Turkey could spill over into the global economy.

With investors already on edge over the China-US trade war, the lira’s collapse sparked a sell-off in Europe and New York at the end of last week, with safe haven assets including the Japanese yen and Swiss franc rallying.

South Korea’s won and the Australian dollar retreated 0.4 percent and the Indonesian rupiah lost 0.9 percent and is at its weakest level since October 2015. The Indian rupee hit a new low of 69.62, extending a recent sell-off with high crude prices also squeezing the unit as India is a net importer of oil.

The yen, a go-to unit in times of turmoil, rose against the dollar, while the Swiss franc was also higher.

On equity markets Hong Kong shed 1.5 percent and Shanghai finished 0.3 percent lower, while Tokyo dropped two percent with exporters hurt by the stronger yen. Sydney fell 0.4 percent, Singapore was 0.8 percent lower and Seoul shed 1.5 percent. There were also sharp losses in Taipei, Manila and Jakarta, which dived 3.3 percent after Indonesia reported Friday its biggest current account deficit in about four years.

Key figures at 0810 GMT Tokyo

- Nikkei 225: DOWN 2.0 percent at 21,857.43 (close)

Hong Kong - Hang Seng: DOWN 1.5 percent at 27,936.57 (close)

Shanghai - Composite: DOWN 0.3 percent at 2,785.87 (close)

Dollar/yen: DOWN at 110.24 yen from 110.58 yen

Oil

Oil prices dipped on Monday as trade tensions and troubled emerging markets dented the outlook for fuel demand, though US sanctions against Iran pointed towards tighter supply ahead.

Benchmark Brent crude oil was down 15 cents at $72.66 a barrel by 1325 GMT. US light crude was 35 cents lower at $67.28.

US energy companies last week increased their number of active oil rigs by the most since May, adding 10 rigs to bring the total count to 869, according to the Baker Hughes energy services firm.

That was the highest level of drilling activity since March 2015.

Despite the cautious mood in oil markets, bullish sentiment found some support from expectations that US sanctions against Tehran would restrict Iranian crude exports, tightening global supply.

Gold

Gold prices sank below $1,200 per ounce for the first time in 17 months on Monday, losing out to US Treasuries and a stronger dollar as investors sought refuge from a financial market rout triggered by a crashing Turkish lira. Investors traditionally use gold as a means of preserving the value of their assets during times of political and economic uncertainty and inflation.

Spot gold had dropped 0.9 percent to $1,199.36 an ounce by 1406 GMT, having earlier dipped to $1,194.61, its lowest since March 2017.

US gold futures were down 1 percent at $1,206.80.

Bearish sentiment can be seen in data from US Commodity Futures Trading Commission showing gold speculators added 22,195 contracts to their net short position in the week to Aug 7, bringing it to 63,282 contracts, the largest since records became publicly available in 2006.

Holdings of the largest goldbacked exchange-traded fund (ETF), New York’s SPDR Gold Trust, at 25.3 million ounces have dropped about 10 percent from their April peak and are at their lowest since February 2016.

First resistance in gold is seen at $1,212.50 and then at the overnight high of $1,221.40 while initial support is seen at $1,200.00 and then at $1,190.00, Kitco Metals said in a note.