Global markets slump for third consecutive trading day

There was also bad news on the economic data front as eurozone manufacturing growth slowed to an almost two-year low in August amid growing trade war fears, a survey showed on Monday.

“As we head into a new week and month, trade concerns will remain front and centre of investors’ minds, along with increasing concerns about stability in emerging markets, after the sharp declines seen in Argentina and Turkey’s currency last week,” said Michael Hewson, chief market analyst at CMC Markets.

Across emerging markets, turbulence continued. The Indonesian rupiah fell to the lowest levels against the dollar since the country’s economic crisis two decades ago, and the central bank said it was intervening in foreign exchange and bond markets.

However, Turkey’s lira, at the centre of emerging-market turmoil in recent weeks, firmed on Monday to 6.56 to the dollar, lifted by a statement from the central bank which said it would “adjust” its monetary stance at its upcoming September 13 meeting.

Inflation was above expectations in August, surging 18% and touching the highest since December 2003.

“This morning’s inflation number was very high and the authorities still haven’t got a credible strategy to deal with that,” said Chris Scicluna, head of economic research at Daiwa Capital Markets.

Turkish finance minister Berat Albayrak told Reuters that the central bank was independent of government and it would take all necessary steps to combat inflation.

Sterling trouble

Among major currencies, the pound stood out as the big underperformer, hurt by comments by the EU’s chief Brexit negotiator, Michel Barnier, that he was “strongly opposed” to British proposals on future trade ties after it leaves the EU.

Weak manufacturing survey data also weighed on sterling, which fell 0.5% to $1.29 and weakened 0.6% against the euro to 90.11 pence The weakness in the pound, however, helped lift London’s blue-chip FTSE rose 0.7%. The dollar hovered near one-week highs against a basket of currencies, lifted by the trade worries.

Global trade concerns supported the dollar, with dollar index nearing its highest level since August 27. It has gained nearly 7% since mid-April when trade tensions first arose.

But gains were muted — safe-haven currencies such as the Swiss franc and the Japanese yen were supported against higher-yielding rivals.

“The demand for the protective yen and the dollar can remain the predominant theme of this week in anticipation of important news on the labour market and the announcement of Trump tariffs,” analysts at FXPro said in a note to clients.

Major economic US data due this week, such as a manufacturing survey on Tuesday and an employment report on Friday, is expected to show solid conditions.

In European bond markets, Italian bond yields edged lower after Fitch Ratings left its credit rating unchanged at BBB, revising only its outlook to negative.

Elsewhere, oil prices steadied on Monday, weighed down by rising supply from Opec and the US but supported by concerns that falling Iranian output will tighten markets once US sanctions bite from November.

Brent crude oil was up 23 cents at $77.87 a barrel.

US crude was unchanged at $69.80.

Reuters