Global markets resilient after Turkey turmoil as lira rebounds

Bloomberg

Financial markets showed signs of resilience following a failed coup attempt in Turkey, as the lira rebounded and U.S. stocks fluctuated near record highs. Haven assets including the yen and Treasuries fell.
The S&P 500 Index swung between gains and losses after a third straight week of gains took the gauge to all-time highs as political tension in the U.K. eased and central banks signaled additional stimulus.
The lira clawed back some of its losses from Friday, when news that army officers had tried to seize power triggered the currency’s steepest slide since 2008. Treasuries fell, extending last week’s biggest decline in a year, and the yen headed for the lowest close this month.
Before the putsch jolted markets on Friday, U.S. stocks had closed at record highs four days in a row. Global equities had recovered from the selloff triggered by the U.K.’s June 23 referendum to leave the European Union as policy makers signaled they will take steps to limit fallout from the vote and the U.S. economy outperformed projections.
“The markets look pretty resilient to the events in Turkey and the key is expectations about monetary policies,” said Christian Gattiker, head of research at Julius Baer Group Ltd. in Zurich. “There’s widespread expectation that central banks will stay supportive.”

Stocks
The S&P 500 slipped 0.1 percent at 9:43 a.m. in New York, after the gauge advanced for a third week as managers upped their stock market exposure to 97 percent, the highest in history. Bank of America Corp. was little changed after the second-biggest U.S. bank by assets said second-quarter profit fell 21
percent.
Yahoo! Inc. and Netflix Inc. are among companies reporting earnings on
Monday.
A gauge of technology shares in the Stoxx Europe 600 Index jumped 3.6 percent. ARM Holdings Plc led shares higher after SoftBank Group Corp. agreed to buy the chip designer for 24.3 billion pounds ($32 billion).
Turkey’s Borsa Istanbul 100 Index sank 6.4 percent and Turkish Airlines tumbled more than 10 percent. The country’s equity market was closed when the coup erupted.
President Recep Tayyip Erdogan ordered reprisals after attempted takeover led to the deaths of more than 190 civilians and so far more than 6,000 people, including members of the judiciary, have been detained.

Currencies
The lira jumped 1.7 percent, after sliding 4.6 percent on Friday. The South African rand climbed 1.8 percent, having dropped 2.4 percent in the last session as news of Turkey’s coup attempt hit emerging-market assets. Mexico’s peso rose 0.6 percent.
The yen fell 0.7 percent after gaining 0.5 percent late Friday.
Still, the currency ended last week down 4.1 percent as Prime Minister Shinzo Abe outlined plans for a “bold” stimulus package in the wake of an election victory.
The pound gained 0.4 percent to $1.3245, extending last week’s advance. Bank of England policymaker Martin Weale said “firmer evidence” was needed on the impact of the U.K. leaving the EU before the bank changes policy.
The Bloomberg Dollar Spot Index was up 0.1 percent. It climbed 0.4 percent in the last session as U.S. reports showed retail sales rose in June by more than economists predicted and manufacturing expanded by the most since January. The odds of the Federal Reserve increasing interest rates by December more than doubled last week to 44 percent in the futures market.
Malaysia’s ringgit weakened 0.8 percent, after strengthening 2.2 percent last week. China’s yuan fell as much as 0.2 percent to its weakest level since 2010, having lost ground in all but one of the last 11 weeks.
“We’re seeing Asian currencies weaker because of the dollar,” said Irene Cheung, a foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. in Singapore.
“I’m not sure whether the Turkey situation has really stabilized and, if there’s any concern, it should be good for the dollar.”

Commodities
Crude oil dipped 1.5 percent $45.28 a barrel in New York following the failed coup in Turkey last week as shipments continued through the vital conduit for oil from Russia and Iraq to the Mediterranean Sea.
It gained 0.6 percent in the last session as news broke of the coup attempt in Turkey, a vital conduit for oil passing from Russia and Iraq to the Mediterranean Sea.
Gold declined 0.7 percent to about $1,328.49 an ounce, trimming this year’s advance to 25 percent. The metal is in a major bull market and may surge to more than $1,500 as low interest rates buoy demand and the U.S. presidential election looms, according to DBS Group Holdings Ltd.
Copper fell 0.9 percent in London, extending Friday’s retreat from the highest level since April, leading most industrial metals lower in London amid speculation that credit conditions in China will be less supportive of demand this half.

Bonds
Turkish bonds fell, sending the 10-year yield up by 57 basis points to this month’s high of 9.66 percent. The rate on German notes due in a decade declined by three basis points to minus 0.02 percent.
Treasuries fell, sending the yield on similar-maturity notes one basis point to 1.56 percent.
“There seems to be a reasonable resolution to the events” in Turkey, said Bill Bovingdon, the chief investment officer at Altius Asset Management in Sydney.