Monday 24 June 2019

No Turkish delight for markets as Lira crash hits stocks

Traders work on the floor of the New York Stock Exchange (NYSE)
Traders work on the floor of the New York Stock Exchange (NYSE)
John Mulligan

John Mulligan

European stocks extended their losses yesterday as the meltdown in the Turkish Lira spurred concerns about an economic crisis that could spread to other emerging markets and rattle the European banking sector.

The Stoxx Europe 600 Index retreated as much as 1.2pc, the most in a month, on track to post a weekly loss of 0.9pc.

Technical charts showed the benchmark broke below both its 50- and 200-day moving averages, sending a bearish signal.

"The current episode is a classic sign of risk aversion - shoot first and ask questions afterwards," said Andrew Milligan, head of global strategy at Aberdeen Standard Investments.

"In an investing environment where ETFs [Exchange Traded Funds] and passive funds are important for cross-border flows, it is understandable to see the euro, European stocks and European bank shares prices all come under pressure," he said.

Yesterday's sell-off worsens the already negative performance of European banking shares this year, which are down 13pc in 2018 amid disappointment the ECB will keep rates on hold until at least next summer.

Investors continue to shun the region's stocks, with European equity funds seeing outflows of $600m in the latest week.

This marks a 22nd straight week of redemptions, according to Bank of America Merrill Lynch strategists.

In Ireland, the ISEQ Overall Index joined the rout, falling almost 1pc.

But neither Bank of Ireland nor AIB were hit by fears over Turkey, with both holding firm for the session.

Shares in Ryanair tumbled 4.1pc to €12.98 as pilots in four countries staged a strike yesterday, piling pressure on the carrier to seal agreements with its crews.

Swiss-Irish food group Aryzta tumbled 9.8pc to €8.15 as analysts remain split over whether the embattled company will have to raise cash from shareholders.

The UK's FTSE-100 fell 1pc. Germany's DAX declined 2pc. France's CAC-40 fell 1.6pc.

Irish Independent

Also in Business