Global market calamity drags Turkish markets down
Posted by meb at October 25th, 2008
In what can be called a global calamity, international markets tumbled Friday as fears of a global recession were heightened and official figures put the UK at the edge of recession.
Although the İstanbul Stock Exchange (İMKB) was spared from the carnage that was taking place elsewhere in the world, it nonetheless closed the day down more than 3.45 percent at 24,176.68.
The Turkish lira also weakened against dollar trading at YTL 1.695. The decline of the lira against the dollar prompted the Turkish Central Bank to announce that it might intervene in the markets by direct foreign exchange sales if there is excessive volatility, officials said on Friday. In a statement the central bank said there were concerns over the credibility of the global finance sector because of recent problems in the international credit markets.
Officials also said that the daily amount of foreign currency to be auctioned would be $50 million, adding that the amount could increase if necessary. World stock markets fell sharply Friday on growing alarm that a global recession will ravage corporate profits and push smaller developing economies to the brink of collapse.
Wall Street plummeted on the open, trading down 400 points or 4.6 percent, before recovering a little ground and trading down 375 at 8,315.
In the European morning, Germany’s benchmark DAX index was down a massive 10.76 percent at 4,033.27. The French CAC40 down 10 percent at 2979.95 while Britain’s FTSE 100 was 8.67 percent lower at 3,733.33 after third quarter GDP fell 0.5 percent, putting the country on the brink of recession, which is technically defined as two quarters of negative growth. The previous quarter’s growth was 0.0 percent.
The woes were compounded by several rumors that pushed the FTSE down further: the Dow was going to suspend trading; GM was going to file for bankruptcy; there would be another coordinated round of rate cuts — all indicators that global recession was becoming real.
Japan’s Nikkei 225 stock average slid 9.6 percent to 7,649. On Thursday, the Dow rose 2 percent to 8,691.25.
Quarterly earnings have been poor so far, with profit warnings coming thick and fast across all industries. Shares in Europe’s automotive companies fell hard on worrying third quarter figures, with truck-maker Volvo AB down 19 percent and PSA Peugeot-Citroen falling 12.4 percent. Daimler AG and Fiat Spa also warned about profits. But heavy industry was not the only sector to feel the pain, with the likes of Sony also warning of tough times ahead. Its shares slid 14 percent in Asia.
The sudden gloom over growth expectations is having the added impact of putting small economies and currencies under extreme pressure. Investors are pulling money out of countries in Eastern Europe, Latin America and Asia on fears vulnerable countries will not only be hit hard by the financial crisis but may also default on debt. “Periods of panic punctuated by occasional calm appears to be the manner of things for now,” said Daragh Maher at Calyon.
He said that as investors flee economies they view as less stable, the repatriation of money has boosted the dollar to the detriment of smaller currencies. “For now this means much of the focus is on the International Monetary Fund and what it might have in mind to insulate emerging markets, given that they are now the clearest pressure point,” said Maher.
The euro, which analysts consider exposed to the vulnerable Eastern European markets, fell to a two-year low against the dollar, dipping below the $1.25 level before recovering somewhat to trade at $1.27
The dollar fell against the yen, however, as low as 90.89 yen, the weakest since August 1995. This is because the yen is used a currency to fund riskier investments — it is sold to raise cash to put in higher growth areas. When investors are scared of losing money in emerging markets, they undo those trades, buying the yen back. This flow intensified Friday, leading some to wonder whether governments and central banks may intervene in foreign exchange markets.
Elsewhere in Asia, Hong Kong’s Hang Seng index fell 8.3 percent to 12,618. Markets in India, Thailand, Indonesia and the Philippines were also down sharply as investors bailed from emerging markets to cut their exposure to risky assets and meet redemption needs at home.
The Organization of the Petroleum Exporting Countries Friday cut its output by 1.5 million barrels a day as of next month in an effort to keep oil prices higher. Light, sweet crude for December delivery today traded around $64 a barrel, over 50 percent less than this year’s historic heights because the worldwide economic crisis has put a huge crimp in demand for crude.
source: Today’s Zaman
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