ASX set for sharp falls as China, Turkey worries hit global sharemarkets

16 August, 2018, 23:30 | Author: Regina Silva
  • Turkish President Recep Tayyip Erdogan

Asian shares fell Wednesday as concerns about Turkey's financial crisis weighed on investor sentiment but the crisis-hit lira took a breather following the turmoil of the past week.

"That China and the USA are beginning to talk again is supporting the market", said Commerzbank currencies strategist Thu Lan Nguyen.

MSCI's broadest index of Asia-Pacific shares outside Japan slid more than 1 per cent to its lowest since August 2017, after bouncing 0.4 per cent the previous day when the Turkish lira showed signs of stabilising.

The Dow Jones Industrial Average .DJI fell 137.51 points, or 0.54 percent, to 25,162.41, the S&P 500 .SPX lost 21.59 points, or 0.76 percent, to 2,818.37 and the Nasdaq Composite .IXIC dropped 96.78 points, or 1.23 percent, to 7,774.12.

The Russian ruble, which lost two per cent on Monday, jumped 1.7 per cent, while the South African rand was 2.2 per cent higher, having lost seven per cent a day earlier.

The financial plan will be closely scrutinised by European authorities and market players, following pledges to increase benefit spending and accelerate tax cuts, despite the possibility of this costing as much as €120 billion (£107 billion) in the first full year.

"We will boycott America's electronic products", Erdogan said mentioning that Turkey would produce the better of every product bought with foreign currencies and export them. "In times when the dollar has been turned into a tool for political punishment, we will continue to strongly take steps to protect the lira in global trade". "I'm quite surprised because I took a lot of cash from the bank in lira and when I woke up in the morning I found out that I nearly lost [the equivalent of] one hundred or two hundred during one night", Kobe Wu Kejia, a Chinese tourist, said.

Turkey's president appeared to escalate a dispute with the United States that has helped foment a Turkish currency crisis, claiming Tuesday that his country will boycott US -made electronic goods.

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Package holiday giant Thomas Cook said this month, before the lira crisis struck in earnest, that it has seen a 63 percent increase in bookings for Turkey from a year ago, with Antalya now its most popular airport for British holidaymakers. Ankara retaliated on Wednesday by doubling tariffs on some USA imports including cars, alcohol and tobacco.

The euro rose 0.3 percent to $1.1373, away from Wednesday's lows of $1.1301. The euro also struggled near a 13-month low versus the Swiss franc, a traditional safe-haven currency.

The single currency drifted down toward $1.13 for the first time since July 2017 and sterling dipped below $1.27 for the first time since June a year ago.

Government bond yields, meanwhile, nudged higher amid the ebb in risk aversion.

The Australian dollar, seen as a proxy for China-related trades, climbed 0.3 percent to $0.7262 after falling to $0.7202 on Wednesday, its weakest since January 2017.

Oil plunged after data showed USA crude stocks rose by 6.8 million barrels to 414.2 million barrels, confounding analysts surveyed by Bloomberg who had expected a drop of 2.5 million barrels.

The single currency stood little changed at $1.1347, not far from a 13-month trough of $1.1330 brushed overnight.

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