Collapsing Turkish Lira Shakes World Stock Markets

Collapsing Turkish Lira Shakes World Stock Markets

Collapsing Turkish Lira Shakes World Stock Markets

$DIA, $SPY, $QQQ, $RUTX, $VXX

A plunging Turkish lira sent shock waves through global equity markets Friday, causing concerns over the financial health of lenders with heavy exposure to the economically-struggling country. The S&P 500 lost 0.7%, dropping into the red for the week (-0.3%), and the Nasdaq (-0.7%) and the Dow (-0.8%) suffered similar declines.

The lira was down about 16% Vs USD at Wall Street’s closing bell, weighed down by continued tensions between the US and Turkey, which made no progress during talks this week regarding the detainment of American pastor Andrew Brunson, who is accused of supporting a group blamed for an attempted coup in Y 2016.

Trying to stop the bleeding, Turkey’s president, Recep Tayyip Erdogan, encouraged citizens to convert their holdings of Gold and foreign currencies into lira Friday morning.

US President Trump swiftly responded by turning up the pressure, announcing that he’s authorized a doubling of tariffs on Turkish steel and aluminum.

Stock markets in Europe and Asia ended Friday with losses, although China’s tariff-ridden Shanghai Composite finished flat.

Investors in the US moved to the Treasury market, sending yields lower across the curve. The benchmark 10-yr yield dropped 8 bpts to 2.86%, a 3-week low.

The drop in yields weighed on the financial sector (-1.2%), which finished with materials (-1.4%) at the bottom of the sector standings. 10 of 11 sectors finished in the Red, with energy (+0.3%) being the exception, helped by a 1.3% rise in WTI Crude Oil futures at 67.67 bbl.

Friday’s economic data

  • Total CPI increased 0.2% (consensus +0.2%) in July, and core CPI, which excludes food and energy, also rose 0.2% (consensus +0.2%). On a Y-Y basis, total CPI is up 2.9% (Vs +2.9% in June) and core CPI is up 2.4% (Vs +2.3% in June).
    • The Key takeaway from the report is that consumer inflation trends are running above the Fed longer-run inflation target, which will keep the Fed inclined to raise the target range for the fed funds rate.
  • The Treasury Budget for July showed a deficit of $76.9-B Vs a deficit of $42.9-B for July 2017.
    • The Treasury Budget data is not seasonally adjusted, so the July deficit cannot be compared to the $74.9-B deficit registered in June.

Investors will not receive any economic data Monday.

Friday, the major US stock market indexes finished at: DJIA -196.09 at 25313.14, NAS Comp -52.67 at 7839.12, S&P 500 -20.30 at 2833.02

Volume: Trade on the NYSE came in at 828-M/shares exchanged

  • NAS Comp +13.6% YTD
  • Russell 2000 +9.9% YTD
  • S&P 500 +6.0% YTD
  • DJIA +2.4% YTD

HeffX-LTN’s Major US Stock Market Indexes Technical Analysis for the Week Ended 10 August 2018

Date Symbol Price Technical Analysis Support Resistance
10 August 2018 QQQ 180.52 Bullish (0.26) 179.56 181.38
10 August 2018 DIA 253.3 Neutral (0.19) 252.94 254.36
10 August 2018 SPY 283.16 Bullish (0.27) 282.50 284.05

Have a terrific weekend.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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