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Analysts at ANZ explained that there was a risk-off tone in markets overnight, with equities and commodities generally lower, while fixed income retained a firmer tone.  

Key Quotes:

“The yield on the US 10-yr note eased 5bps to 2.85% and the yield on the German benchmark bund fell 2bps to 0.3%. The JPY and USD were firm, benefiting from the risk-off tone. The lira gained as much as 7.5%, with Turkish authorities taking measures to support the currency, but turmoil in the nation continues (see below). At the time of writing, the S&P500 was off 1.0%, the DAX was off 1.6%, CAC 40 down 1.8% and the FTSE 100 was off 1.5%. Weaker commodities (especially copper) weighed on the materials sector, while technology stocks were weighed by disappointing earnings and European banks continue to feel the heat. Oil fell 3% on the back of higher US inventories. Gold fell 1.4%.”

The Turkish lira gained overnight

“The Turkish lira gained overnight, with the Turkish banking regulator publishing new rules to support the currency. This included limiting offshore access to Turkish liquidity by imposing stricter leverage ratios on swap transactions in order to stop foreigners shorting the lira. The regulator also made it easier for lenders to be more flexible with Turkish companies struggling with debt repayments. According to Bloomberg, Turkish companies have USD217bn of foreign-currency debt outstanding, with USD16bn of debt due by year end. Also helping support the lira and other Turkish assets was Qatar’s announcement that it would invest USD15bn in FDI in Turkey to help avert a financial crisis. Nonetheless, the turmoil continues to weigh on European bank stocks and emerging-market stocks and currencies. And the Turkish President’s diplomatic feud with Trump intensified further overnight, with the announcement that they would impose a new spate of tariffs on US goods, in retaliation to US sanctions.”