Both the Turkish and Russian economies are showing negative tendencies, as the tensions in Idlib between Moscow and Ankara are rising.
The Borsa Istanbul 100 Index slumped 10% at the open on February 28th, its biggest intraday drop in almost seven years, led by lenders Akbank TAS and Turkiye Garanti Bankasi AS.
The yield on two-year government notes surged more than 50 basis points.
Bloomberg cited two unnamed traders with knowledge on the matter, according to whom Turkish state banks were selling dollars aggressively as the Turkish lira lost 0.8%.
“The market is clearly very nervous,” said Piotr Matys, a strategist at Rabobank in London. “It is essential to defuse tension and avoid a direct military confrontation between Turkey and Russia over Syria.”
The Capital Markets Board banned short-selling in the Turkish stock market on February 28th, it said in an emailed statement. It did not mention whether the ban would be extended into the following week.
“It’s difficult to be optimistic,” said Nigel Rendell, a senior analyst at Medley Global Advisors LLC in London, pointing to uncertainties around Turkey’s monetary policy and currency measures. “Without some breakthrough with the coronavirus, even a partial resolution of the Syrian crisis will not be enough to decisively swing sentiment around.”
On the Russian side, the RTS index collapsed by 7.68% to 1279.74 points at 12:30 Moscow time, according to the Moscow Exchange. The Moscow Stock Exchange Index is down 5.16% to 2765.32 points.
A sharp decline in the RTS index occurred against the backdrop of a weakening ruble ($1 rose above 71 rubles) and a fall in oil prices – on February 28th, Brent crude fell below $50 per barrel.
The US market began to fall on February 24 because of concerns about the risk of a coronavirus pandemic. Later, these concerns spread to Russian investors.
Now global markets are waiting for the largest central banks to take reciprocal steps aimed at preventing the implementation of the worst-case scenario and mitigating the possible consequences of the coronavirus problem, according to experts.
At the same time, if monetary authorities delay or show indecision, this may aggravate the already serious situation in world markets, which has signs of growing panic, analysts are sure.
For Russia this is largely due to the weakening ruble, as well as the fall in oil prices.
The most active Brent crude contract for May was down 90 cents, or 1.7%, at $50.83 a barrel by 0141 GMT, a 14-month low. The international benchmark, which fell about 2% on February 27th, has shed around 12 per cent this week and is on track for its steepest weekly decline since mid-January 2016.
The producer group known as OPEC+, which is currently reducing output by roughly 1.2 million barrels per day to support prices, is set to meet in Vienna on March 5-6.
“We now believe the group needs to make much steeper cuts than the 600,000 barrels per day (bpd) recommendation from their technical committee to support prices,” Jefferies analyst Jason Gammel said.
“At least a 1 million bpd cut for the second quarter strikes us as necessary to merely moderate inventory builds, and we confess to underestimating demand destruction over the last several weeks.”
For Turkey due to the worsening relations with Russia, since a potential loss of Russian tourists is possible, as well as worsening trade relations, such as an inability to export tomatoes to Russia, in addition to other potential sanctions that can be adopted by Moscow.
There is a wider negative trend in the global economy for a while, and the coronavirus is used as a sort of justification for the worsening conditions, due to how “popular” hysteria regarding it is in the media sphere.
Both Turkey and Russia have little interest in an open conflict and a worsening in their relations, be it military, trade or otherwise.
The general global situation at the currently moment, and the likely incoming economic crisis are creating conditions that make it possible to settle various economic issues through a local conflict, and this is not a recent occurrence, as it has happened repeatedly in the past.
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