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GLOBAL MARKETS-Shares regain footing as lira pulls out of nosedive

Published 2018-08-14, 08:41 a/m
GLOBAL MARKETS-Shares regain footing as lira pulls out of nosedive
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* Lira rebounds 5 percent after three week-long thrashing

* Rand and rouble, European bank stocks also drive higher

* MSCI ex-Japan subdued but Nikkei bounces 2.3 pct

* China economic data mostly softer than forecast

* Euro finds some support, yen and Swiss franc favoured

* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh

By Marc Jones

LONDON, Aug 14 (Reuters) - World share markets fought to regain their footing on Tuesday, as Turkey's lira pulled out of its recent nosedive and reassuring data from Germany helped offset the latest wobbles in China's giant economy.

After three weeks of heavy pounding, Turkey's lira finally got some respite as signs the country's authorities were trying to address the situation triggered a 5 percent relief rally to 6.5 per dollar. TRYTOM=D3 it had lost almost 10 percent on Monday alone and nerves were briefly tested again as Turkey's President Tayyip Erdogan urged Turks to boycott U.S. electronic products in response to recent criticism from Washington.

The rot also stopped for the South African rand, the Russian rouble and the Brazilian real. Argentina's central bank unexpectedly raised interest rates by 5 percentage points on Monday. Even so, the peso hit a record low. things get very volatile in both directions once you have had a really big move," Saxo bank's head of FX strategy John Hardy said. "To suggest this thing is over, you would have to see that Turkey is isolated... I'm not there yet and I don't think the market is there yet."

European shares also steadied after two days of selling as anxieties over contagion from the Turkish currency crisis eased.

After falling to a 21-month low on Monday, euro zone bank stocks .SX7E initially rose 0.8 before slipping back again, while the cross-sector pan-European STOXX 600 benchmark .STOXX and Wall Street futures both climbed. .EU .N

Sentiment was helped as data showed that Europe's largest economy, Germany, picked up more steam than expected in Q2 although the markets' bounce might have been stronger had surveys from China not proved softer than expected.

Chinese retail sales, industrial output and urban investment all grew by less than forecast in July, a triple dose of disappointment that underlined the argument for more policy stimulus in China as trade risks also intensify. Shanghai blue-chip index .CSI300 closed down 0.5 percent and weighed on MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS , which eased 0.1 percent.

Moves elsewhere were mixed. Japan's Nikkei .N225 rose 2.3 percent and Australian stocks .AXJO added 0.8 percent. EMini futures for the S&P 500 ESc1 were still a fraction higher and 10-year Treasury yields held at 2.88 percent US10YT=RR .

EMERGING CONCERNS

Investors were encouraged that U.S. declines had been only minor on Monday after the losses by the lira and other emerging-market currencies. The Dow .DJI ended Monday down 0.5 percent, the S&P 500 .SPX lost 0.4 percent and the Nasdaq .IXIC fell 0.25 percent. .N

MSCI's benchmark emerging market equities index .MSCIEF touched its lowest level since July 2017 in Asian trading though, taking losses since late January to just shy of the 20 percent threshold generally accepted to be a 'bear market'.

"The more significant emerging-market concern relates to the risk that regional underperformance becomes a source of disruption through swings in capital flows and currencies," said Matt Sherwood, head of investment strategy at Perpetual.

"While the focus at present is on Turkey, where currency depreciation and rising rates has translated into a marked tightening of financial conditions, it could spread to Mexico, Brazil and India."

Sherwood cited the NAFTA negotiations as a key risk for Mexico and upcoming elections in Brazil and India as potential threats for those two markets.

For graphics on wider market impact of Turkish lira crash click L5N1V44UD

GOLD LOSING ITS LUSTRE

The day's rise in risk appetite saw bond yields in Spain and Italy dip, although the euro was still struggling at $1.1407 EUR=D3 , having touched its lowest since July 2017 on Monday.

It also reached one-year lows against the yen and Swiss franc, safe harbours in times of stress.

The dollar was a touch firmer at 110.89 yen JPY= , having hit a six-week trough around 110.10 on Monday. Against a basket of currencies, the U.S. currency .DXY was barely budged at 96.300.

In commodity markets, gold briefly slid to its lowest since late January 2017. It was last at $1,195 an ounce XAU= .

U.S. government data last week showed that gold speculators had lifted their bearish bets to a record.

Holdings of the largest gold-backed exchange-traded fund, New York's SPDR Gold Trust GLD (NYSE:GLD), have dropped about 10 percent from their April peak and are at their lowest since February 2016. HLDSPDRGT=XAU

Oil prices rose after a report from OPEC confirmed that top exporter Saudi Arabia had cut production to avert looming oversupply. O/R

Brent gained just over a dollar to $73.74 a barrel LCc1 while U.S. crude added 99 cents to $68.18 CLc1 .

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Turkey's ripple effect on global assets

https://reut.rs/2vHB5ry

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