£30bn wiped off FTSE as Turkey crisis goes global
NEARLY £30billion was wiped off Britain’s leading companies yesterday as concerns about the global economy sent stock markets tumbling.
As the crisis in Turkey intensified, and fresh worries emerged about China as well as Donald Trump’s aggressive trade policies, shares across Europe, Asia and the United States fell.
Analysts warned the ingredients for ‘ a classic summer swoon’ on financial markets are in place, leading to a volatile few weeks for savers and investors.
In the UK, the FTSE 100 index closed down 1.5 per cent last night, costing those with money tied up in blue chip stocks through pensions and other holdings £29.4billion.
On the Continent, the German stock market fell 1.6 per cent while the French benchmark was down 1.8 per cent.
Further afield, share prices in emerging markets suffered their worst day for six months as falling commodity prices and turmoil on currency exchanges all took their toll.
The FTSE Emerging index – made up of stocks in the developing world including China, Brazil, India, Taiwan and South Africa – has lost more than 20 per cent of its value this year. Naeem Aslam, chief market analyst at trading firm TF Global Markets UK in London, said: ‘We are now seeing investors becoming more concerned about geopolitics.’
The unfolding crisis in Turkey has rattled investors with the lira nosediving amid concerns about President Erdogan’s han the dling of the economy and worsening ties with the US.
Turkey and the US are now locked in a tit-for-tat trade war that has seen both countries hit each other with punitive tariffs, with Turkey yesterday doubling tariffs on some US imports.
It followed Mr Trump’s move last week to double tariffs on aluminium and steel imports after Turkey refused to free an American pastor imprisoned there. The lira is down more than 30 per cent against the dollar since January.
Inflation has hit 15 per cent in crisis-torn country. Meanwhile, a senior Barclays trader has emerged as one of the biggest losers from the slump in the value of the Turkish lira. Tolga Kirbay, a London-based trader, has racked up losses of £15million having been taken by surprise by the sell-off.
The collapse of the lira – which has turned Turkey into a top holiday destination for British families – has wreaked havoc on currency markets with the Indian rupee, Mexican peso and South African rand all on the slide in recent days.
China’s yuan was also caught in the sell-off, falling to its weakest level since January last year. A rising dollar – boosted by strong economic growth in the US and increased demand for the greenback among investors worried about global turmoil – has increased the pressure on emerging market currencies.
City commentator David Buik, of trading firm Core Spreads, said global markets were suffering from ‘contagion’ as worries about Turkey, trade wars and China spilled over into other countries.
Chris Beauchamp, chief market analyst at City trading firm IG, said: ‘The ingredients for a classic summer swoon are all there, from rising volatility to an emerging markets crisis.’
David Madden, a market analyst at CMC Markets UK, said: ‘Dealers are worried about the currency crisis in Turkey, and the cooling of Chinese growth.’
‘A classic summer swoon’