Burned by the lira

European bourses echo the decline across Asian markets this morning as a further fall in the Turkish lira causes selloffs and increased caution across stock markets.

The lira had already declined 20% against the dollar on Friday - on a mixture of domestic financial problems and increasing friction with the US - and the decline continued this morning with the Turkish currency plumbing new lows. 

For the time being Turkey’s financial crisis looks localised but the country’s central bank has perhaps only days to stop the decline of the currency before the lira’s freefall results in loan defaults, starts seriously affecting the country’s financial system and potentially starts spilling over onto European banks. Into this domestically induced financial slide comes the deteriorating relationship between Turkey and the US. 

The US is holding it against Turkey, pointing to its refusing to support US sanctions against Iran and not releasing an American pastor who is being held on terrorism charges. The US response was fairly clear cut – on Friday when the lira was in free-fall the US announced it would raise the tariffs on imports of Turkish steel to 50% and the tariffs take effect Monday morning.

Oil slides on stronger dollar, Turkey contagion

Oil prices briefly perked up at the end of last week because the International Energy Agency said that sanctions against Iran could create supply problems later this year, but a firming of the dollar offset the move higher. With the start of the new week oil prices began moving downward again. The deterioration of the financial situation in Turkey played a part too, and contributed to the risk aversion across markets.  Brent crude is down 0.32% while the US listed West Texas Intermediate is trading 0.31% lower. 

On the currency markets both the pound and the euro are lower against the dollar, sterling trading down 0.31% and the common currency down 0.39%. 

Monsanto hit by $289 million bill over weed killer 

Monsanto, now under its new parent Bayer, will have to pay out almost $300 million for using an ingredient in its weed killer Roundup which is believed to be causing cancer. A San Francisco Court ruled on Friday in favour of the claimants in the first lawsuit of thousands which are due to go to trial over the coming months. Bayer shares are down 11%.


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.