“Turkey’s Cratering Markets Stoke Speculation Over Extreme Measures.”
Desperate measures are in the air in Turkey: trading rooms are awash with talk of a bailout by the International Monetary Fund and potential capital controls. But there’s a vacuum at the core.
The central bank and government have been largely silent as the currency plummeted to record lows and the U.S. imposed sanctions and threatened more. The lira slipped for a seventh day against the dollar after falling by the most in a decade on Monday, while the yield on 10-year bonds surged above 20 percent to an all-time high.
“It will remain like this until the central bank commits unconditionally to hike rates and keep them high until inflation has turned,” Henrik Gullberg, a strategist at Nomura International Plc, said by email. “The market needs that sort of hard commitment.”
Yet the radio silence from Ankara — a result of June elections that gave President Recep Tayyip Erdogan almost absolute power in policy making — is deafening. Erdogan is a staunch critic of higher rates and investors worry that he may be standing in the way of any further rate increases.
The lira is buckling under the weight of one of the widest current-account deficits in emerging markets and inflation is spiraling ever higher. As of July it was running at more than three times the central bank’s target, driving the real policy rate to below 2 percent, the lowest since December.
The lira weakened 0.5 percent to 5.3548 per dollar as of 1:21 p.m. in Istanbul after sinking as much as 6.7 percent to the dollar Monday, taking the currency’s slide to 29 percent so far this year. Ten-year yields surged 42 basis points to 20.09 percent, while the benchmark stock index was up less than 1 percent, narrowing its year-to-date loss in dollar terms to about 40 percent.
“Massive wildfire rages after becoming largest in California’s history.”
California’s biggest wildfire on record raged on Tuesday as hot and windy conditions challenged thousands of fire crews battling eight major blazes burning out of control across the state.
The Mendocino Complex grew to span 283,000 acres (114,526 hectares) on Monday when two wildfires merged at the southern tip of the Mendocino National Forest, the California Department of Forestry and Fire Protection said.
It is the largest of eight major fires burning out of control across California, prompting U.S. President Donald Trump to declare a “major disaster” in the state.
The size of the fire has surpassed that of last year’s Thomas Fire, which burned 281,893 acres in Santa Barbara and Ventura counties when it destroyed more than 1,000 structures. The Mendocino Complex has burned 75 homes and forced thousands to be evacuated.
Temperatures could reach 110 degrees (43 Celsius) in Northern California over the next few days with gusty winds fanning the flames of the complex, a National Weather Service meteorologist said.
The 3,900 crews battling the Mendocino Complex on Monday were focusing on keeping flames from breaking through fire lines on a ridge above the foothill communities of Nice, Lucerne, Glen Haven, and Clearlake Oaks, said Tricia Austin, a spokeswoman for Cal Fire.
Elsewhere in California, evacuations were ordered for cabins in Cleveland National Forest canyons in Orange County on Monday afternoon after a blaze broke out and quickly spread to span 700 acres (283 hectares).
“Iran sanctions: Trump warns trading partners.”
US President Donald Trump has issued a strong warning to anyone trading with Iran, following his re-imposition of sanctions on the country. «Anyone doing business with Iran will NOT be doing business with the United States,» the president tweeted.
Some re-imposed sanctions took effect overnight and tougher ones relating to oil exports will begin in November. Iran’s president said the measures were «psychological warfare» which aimed to «sow division among Iranians».
The sanctions follow the US withdrawal from the Joint Comprehensive Plan of Action, also known as the Iran nuclear deal, earlier this year. The deal, negotiated during the presidency of Barack Obama, saw Iran limit its controversial nuclear activities in exchange for sanctions relief.
Mr Trump has called the deal «one-sided», «disastrous» and the «worst I’ve ever seen». He believes renewed economic pressure will force Iran to agree to a new deal. The European Union, which remains committed to the original agreement. has spoken out against the sanctions, vowing to protect firms doing «legitimate business».
“Stocks Rise on Economy Optimism as Dollar Slips: Markets Wrap.”
U.S. stocks rose within striking distance of records amid optimism economic growth can continue apace even as the world’s two largest economies square off in a trade skirmish. The dollar slid the most in two weeks.
The S&P 500 Index hit the highest level since Jan. 29 and the Cboe Volatility Index dipped below 11 for the first time since May. Miners lifted the Stoxx Europe 600 Index as commodities advanced. Chinese stocks led a broad rally in Asia, with the Shanghai Composite Index posting its biggest gain in two years on hopes for more policy support for investment.
The gains in emerging-market equities overshadowed rising woes in Turkey, where the yield on the country’s 10-year bonds touched a record high amid a diplomatic spat with the U.S. The lira clawed its way back from a record low, only to later give up some gains.
As earnings season enters its final phase, most major U.S. companies have now reported and about four out of five have surprised to the upside. That’s pushed the S&P 500 within 25 points of a record, even as investors fret over the escalating trade war between America and China. Meanwhile, geopolitical concerns linger in the background, including confusion about the status of negotiations intended to lead to the denuclearization of the Korean peninsula and the Trump administration’s restoration of some U.S. sanctions on Iran.
Elsewhere, crude climbed after Saudi Arabian production cuts added to concern about tightening worldwide supplies. Gold advanced with industrial metals. European sovereign bonds were mostly lower, with Italian notes rising. The yen strengthened after Reuters reported that the Bank of Japan had considered raising interest rates this year. Germany’s industrial production fell more than expected in June, but the euro strengthened after a recent run of losses.