World shares rebound as Turkey’s lira pulls out of nosedive

“I don’t believe it’s all over,” said Minh Trang, senior currency trader at Silicon Valley Bank in California. “We are just getting a bit of reprieve from the recent down move.” The Turks have exhausted the possibility of interest rate hikes and are backed into a corner by their inadequate level of currency reserves, Paul McNamara, emerging-markets investment director at GAM Investment Management in London, said in a note.

A much-needed demand slowdown in Turkey is causing asset quality problems in banks, he said. The role of construction in the Turkish economy, for example, is comparable to that in Spain or Ireland ahead of the European bust a decade ago, he said.

MSCI’s gauge of global equity markets halted a four-day slide to rise 0.28%, while Japan’s Nikkei jumped 2.28% in its biggest one-day gain since March.

European shares steadied after a two-day sell-off as concerns about contagion from Turkey’s currency crisis eased. The pan-regional FTSEurofirst 300 index edged up 0.01% and the benchmark STOXX 600 slid 0.03%. Data showing the region’s largest economy, Germany, picking up more steam than expected in the second quarter helped sentiment in Europe, though the markets’ bounce might have been bigger had Chinese economic surveys not disappointed.

Investment growth slowed to a record low while industrial output and retail sales both missed expectations.

The downdraft for emerging-market currencies stopped, with the rand, Russian rouble, Brazilian real and Mexican peso, a proxy for emerging-market currencies, all rising. Still, MSCI’s emerging markets index for equities fell to its lowest since July 2017.

Stocks on Wall Street rallied. The Dow Jones Industrial Average rose 121.53 points, or 0.48%, to 25,309.23. The S&P 500 gained 17.09 points, or 0.61%, to 2,839.02; and the Nasdaq Composite added 39.60 points, or 0.51%, to 7,859.31.

The euro fell, hitting 13-month lows against the dollar and Swiss franc, as traders fretted over the exposure of European banks to Turkey.

The dollar index, which tracks it against a basket of major currencies, rose 0.02%, with the euro down 0.26% to $1.1378. The yen weakened 0.15% against the greenback at ¥110.93 to the dollar.

Oil prices jumped after Saudi Arabia said it cut production, adding to concerns about global supply as US sanctions against Iran bite its exports. US crude rose 80c to $68.00 a barrel and Brent gained 81c to $73.42.

Reuters