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Turkey's
Agony Explodes As Trump Doubles Steel, Aluminum Tariffs
Zero
Hedge,
10
August, 2018
Just
when you thought Turkey's moment of agony couldn't get any worse, it
did moments ago when watching the collapse of the Turkish Lira and
sensing perhaps that Erdogan's end is near, President Donald Trump
blindsided the NATO member state with a tweet, announcing
that he is doubling Turkey's steel and aluminum tariffs to 50% and
20%, respectively.
Why? Because as he said "Our relations with Turkey are not good
at this time!"
I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!
I
have just authorized a doubling of Tariffs on Steel and Aluminum with
respect to Turkey as their currency, the Turkish Lira, slides rapidly
downward against our very strong Dollar! Aluminum will now be 20% and
Steel 50%. Our relations with Turkey are not good at this time!
— Donald J. Trump (@realDonaldTrump) August 10, 2018
Trump's
ask: the release of Pastor Brunson, which Erdogan has so far
staunchly refused to agree to.
In
response, the Turkish Lira which already had its worst day ever, just
plunged even more with the USDTRY surging as high as 6.3839, an all
time high.
Meanwhile,
the TUR ETF is crashing, and is down 15% in the premarket.
The
Turkish currency crisis is finally here and it is sending shockwaves
around the globe.
After
weeks of a slow, but controlled collapse, investors finally hit the
panic button overnight, when the Turkish lira crashed as much as
11.2% against the dollar as concern over contagion from Europe’s
exposure to the Turkish economic devastation overshadowed promises by
the Turkish government to bolster the economy.
The
Turkish Lira plunged to a record low of 6.3005 per dollar on Friday
morning, before rebounding modestly to 5.88, and is now down more
than 35% in the year to date.
TurkishBanks Plan Emergency Meeting As Erdogan Vows To Retaliate To US Sanctions
From
Turkish media
US,
European stocks dive, euro falls, as lira drop sends global markets
lower
10
August, 2018
Stocks
are opening moderately lower on Wall Street Friday following steeper
losses in Europe amid a widespread selloff in global stocks as the
Turkish lira tumbles over a deepening rift with the United States.
President
Donald Trump doubled tariffs on aluminum and steel imports from
Turkey, deepening the currency's losses and raising concerns that the
crisis could weigh on other economies.
"Problems
in emerging markets are more important than ever because of the
global growth engine that emerging markets have become," Peter
Cecchini, chief market strategist at Cantor Fitzgerald in New York,
wrote in a note.
"This
will eventually matter greatly to U.S. markets."
Investors
fled to safe-haven assets, with the dollar rising to a 13-month high
and U.S. bond yields slipping to a three-week low. The Dow Jones
Industrial Average fell more than 200 points.
Ten
of the 11 major S&P sectors were lower, with bank stocks taking
the biggest hit.
"Banks
are leverage plays on the global economy. Anytime there's a sniff of
contagion they will be weak," said Michael Antonelli, managing
director, institutional sales trading at Robert W. Baird in
Milwaukee.
JPMorgan,
Wells Fargo and Bank of America fell more than 1 percent, weighing
the most on the benchmark S&P 500.
At
9:48 a.m. EDT the Dow Jones Industrial Average was down 158.88
points, or 0.62 percent, at 25,350.35, the S&P 500 was down 13.35
points, or 0.47 percent, at 2,840.23 and the Nasdaq Composite was
down 31.69 points, or 0.40 percent, at 7,860.09.
S&P
technology sector's 0.42 percent fall was led by chipmakers.
Intel
dropped 2.6 percent after Goldman Sachs downgraded the stock to
"sell". Micron also fell 1.1 percent.
Microchip's
shares fell 10.5 percent, the biggest decliner on the S&P, after
it forecast disappointing second-quarter revenue.
Online
storage company Dropbox sank 9.1 percent after its chief operating
officer left.
Bond
prices rose. The yield on the 10-year Treasury note fell to 2.89
percent.
Data
on Friday showed U.S. consumer prices rose in July and the underlying
trend continued to strengthen, pointing to a steady increase in
inflation pressures.
Declining
issues outnumbered advancers for a 2.34-to-1 ratio on the NYSE.
Declining issues outnumbered advancers for a 1.85-to-1 ratio on the
Nasdaq.
The
S&P index recorded 4 new 52-week highs and 7 new lows, while the
Nasdaq recorded 33 new highs and 45 new lows.
Bank
shares across Europe also fell and the euro slipped to its lowest
since July 2017.
Shares
in France's BNP Paribas, Italy's UniCredit and Spain's BBVA, the
banks seen as most exposed to Turkey, fell as much as 4 percent.
That
took euro zone bank shares down 1.3 percent while the pan-European
STOXX 600 index fell 0.7 percent.
"People
looking at things this morning are much more aware that there is
central (major) contagion risk," said David Owen, chief European
economist at Jeffries in London.
"Having
said that, what's happening in emerging markets is leading to
risk-free rates being bid for and that includes Treasuries, Bunds and
gilts."
PLAY
IT SAFE
The
MSCI All-Country World index, which tracks shares in 47 countries,
was also down 0.6 percent on the day, having erased all its gains for
the week. Wall Street was set for a weak open.
As
investors piled into "safe" bonds, German yields hit
three-week lows and yields on U.S. 10-year Treasuries fell to 2.8913
percent.
Investors
are now awaiting the release of U.S. consumer price inflation data
for July for clues on the interest rate outlook and to gauge if new
import tariffs were starting to have an impact. The data is expected
to show inflation increased 0.2 percent, after rising 0.1 percent in
June.
The
Australian dollar, often viewed as a gauge of global risk appetite
due to its reliance on commodities, was the biggest faller among
developed currencies, down 1 percent on the day. Going in the
opposite direction was the safe-haven Japanese yen, which hit a
one-month high against the dollar.
The
dollar index, which measures the greenback's strength against a group
of six major currencies, breached 96, taking it to its highest level
since July 2017.
Adding
to emerging market currency woes was the Russian ruble, which
weakened to 67.12 to the dollar. Overnight it had retreated to its
lowest since November 2016 on threats of new U.S. sanctions,
weakening beyond the psychologically important 65-per-dollar
threshold.
"Other
EM currencies have held their ground against the dollar, having
generally been weakening previously," said analysts at Capital
Economics.
"In
most cases though, we suspect that this resilience will prove
temporary," they said, highlighting expectations of rising U.S.
interest rates and worries over growing U.S. protectionism.
In
commodities, U.S. crude oil rose 0.25 percent to $66.99 a barrel,
while Brent crude was 0.4 percent stronger at $73.33 per barrel.
Despite
the widespread flight to safe-haven assets, spot gold fell 0.2
percent to $1,210 per ounce.
fi
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