Turkey’s lira and stock market tumble; travel stocks hit by holiday worries – as it happened

Time to recap.

Turkey’s financial markets have suffered a sharp slide after the country’s central bank chief was dramatically fired over the weekend.

The lira is currently down 8% at 7.78 to the dollar, with the dismissal of Naci Agbal triggering a wave of selling.

Turkey’s stock market also plunged, with the BIST 100 shedding almost 10% of its value as investors headed to the door.

Agbal was dismissed just days after announcing a bigger-than-expected hike in interest rates, which pleased investors but clearly displeased president Recep Tayyip Erdoğan.

Analysts say Agbal’s departure is a blow to hopes that Turkey could adopt more orthodox monetary policy, and could lead to capital flight -- potentially forcing Istanbul to consider capital controls.

Franziska Palmas, markets economist at Capital Economics, predicts more volatility ahead:

The sell-off in Turkish assets and the lira sparked by President Erdogan’s decision over the weekend to sack the central bank (CBRT) governor Naci Agbal is likely to continue over the coming weeks in our view.

However, we think that contagion to other emerging markets (EMs) will remain limited.

Treasury and Finance Minister Lutfi Elvan tried to reassure the markets, pledging that Turkey will continue to stick to free markets and a liberal foreign-exchange regime.

But investors are clearly rattled, with Turkish government bonds slumping this morning and top economists at IIF warning that financial conditions are tightening.

Ratings agency S&P Global says the risks of Turkey implementing capital controls were “elevated” but not the firm’s baseline scenario.

Reuters has the details:

“Recent changes once again highlight the limited operational independence of the Central Bank of Turkey and overall low predictability of economic policy,” S&P’s analysts said.

“One of the key things to watch over the short-term, in our view, is the behaviour of domestic resident depositors and whether they increasingly convert to foreign currency in response to latest developments... Although risks are elevated, capital controls are not our baseline scenario.”

Here’s a round-up of analyst reactions.

Elsewhere.. shares in UK travel companies fell, as Britons were warned not to book foreign holidays yet.

Airlines, cruise operators and package holiday firms all dropped, amid concerns that rising Covid-19 cases in Europe will make it harder to allow international travel this summer.

US economic output fell during a cold and sometimes snowy February, according to the latest survey from the Chicago Fed.

US house sales also weakened in February, with the bad weather and lack of supply both htiting the market.

Deliveroo is on track for the biggest London stock market debut in almost a decade, after its upcoming IPO valued the firm at up to £8.8bn.

Shares in Tesla have rallied back towards $700, after tech investor ARK hiked its price target to $3,000 in 2025.

Whisky, cheese and chocolate producers have suffered the biggest post-Brexit export losses in the food and drink sector, new figures from HMRC have shown.

The UK competition watchdog has launched an investigation into Penguin Random House’s $2bn (£1.45bn) takeover of Simon & Schuster, amid claims that the deal will create a “behemoth of books” with too much power in the global publishing industry.

Kingfisher, the owner of B&Q and Screwfix, has reported a surge in sales and profits for 2020 as a locked-down nation turned to home improvements.

In Italy, 40,000 Amazon logistical workers are holding a national strike over working conditions.

Ikea’s French subsidiary has gone on trial accused of running an elaborate system to spy on staff and job applicants using private detectives and police officers.

Goodnight. GW

European stock markets also posted modest gains, with Germany’s DAX and Italy’s FTSE MIB both closing closing 0.25% higher,

David Madden of CMC Markets said sentiment was “a bit fragile”, partly due to the tumbling Turkish stock market.

Last week, there were concerns about rising Covid-19 cases in several large European countries, such as Germany, Italy and France. The situation has deteriorated as those counties have extended restrictions, so that has pushed back the prospect of their economies being reopened. It was confirmed that Germany’s lockdown has been extended until 18 April, but the DAX 30 and the majority of other European indices are set to finish higher today.

For now, governments are back rolling out the vaccinations as normal but later this week the EU might look to ban exports of the AstraZeneca-Oxford vaccine and its ingredients to the UK. Such action would be drastic but it seems that Brussels are determined to play catch up with respect to vaccinations rates. The EU has vaccinated approximately 10% of its population while the UK’s rate is above 40%.

The London stock market has closed higher, despite the concerns that rising Covid-19 cases could scupper summer holiday plans.

The FTSE 100 ended the day 17 points higher at 6726, a gain of 0.25%.

DIY chain Kingfisher (+3.6%) ended as the top riser, after reporting its profits were bein boosted by new ‘young DIY-ers’ during the pandemic.

AstraZenaca (+3.2%) also had a good day, after US clinical trial of its Covid-19 vaccine showed 79% efficacy at preventing symptomatic disease and 100% efficacy against severe or critical disease and hospitalisation.

But travel stocks suffered from fears over a third wave of Covid-19 infections, with airline group IAG sliding 5.2% and Rolls-Royce off 4.3%.

Among smaller companies, cinema chain Cineworld slumped 8,7% and property firm Hammerson shed over 10%.

After a torrid day. the Turkish stock market has closed deep in the red.

The benchmark BIST 100 index has slumped by 9.8%, or nearly 150 points, to 1379 points.

That looks to be its worst daily fall since 2013, eclipsing the worst days of the pandemic crash a year ago.

Banks, utilities, healthcare firms and energy companies were all particularly hit, with many firms falling 10% - having hit the ‘limit down’ restrictions on the exchange.

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Sky’s Ian King points out that Turkey is now on its fourth central bank governor in less than three years - making even the managerial merry-go-round at Chelsea look slow.

Who is the harder taskmaster - Roman Abramovich or Recep Tayyip Erdogan?

Chelsea’s billionaire owner has a reputation for being trigger-happy, as many of the managers he has fired will attest, with Frank Lampard the latest to be shown the door in January.

To judge from events in Istanbul during the last 48 hours, however, even being Chelsea manager carries more job security than being governor of the Central Bank of the Republic of Turkey (CBRT).

Over in Italy, consumers have been urged by unions to refrain from buying from Amazon for the day on Monday as about 40,000 of the online shopping giant’s logistical workers held a national strike over working conditions.

It is the first walkout in Italy to affect Amazon’s entire supply chain and involves warehouse and logistical hub workers as well as drivers provided by third-party services.

In other news today, Ikea’s French subsidiary has gone on trial accused of running an elaborate system to spy on staff and job applicants using private detectives and police officers.

Ikea France, as a corporate entity, is being prosecuted in a court in Versailles, as well as several of its former executives who could face prison terms. More here:

There’s rarely an ideal time to sack your central bank governor.

But last weekend’s dismissal of Turkey’s Naci Agbal comes at a particularly tricky moment for the country’s economy, points out Reuters’ Dasha Afanasieva.

Inflation is at 16% (more than three times over target) and the current account is in a steep deficit due to falling tourist revenues and a general economic slowdown. This video clip has more details.

Also in the US, house sales fell sharply in February - another sign that the cold wintery weather chilled the economy.

Sales of existing homes fell 6.6% last month, more than the 3% fall expected.

The National Association of Realtors also reported a slump in houses on the market, despite prices being at record levels.

The supply of homes for sale fell 29.5% year over year - the largest annual decline ever, says CNBC - to 1.03 million homes.

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Tesla is among the top risers on Wall Street, up 3.5% at $677, after asset manager ARK Invest set a punchy new price target for the company -- $3,000 per share by 2025.

ARK, a long-time backer of Tesla, set its new price targets after calculating that there’s a 50% chance it achieves fully autonomous driving within five years. That would allow the company to scale its planned robotaxi service faster.

ARK explains:

In our last valuation model, ARK assumed that Tesla had a 30% chance of delivering fully autonomous driving in the five years ended 2024. Now, ARK estimates that the probability is 50% by 2025.

Since our last forecast, neural networks have solved many complex problems previously considered unsolvable, increasing the probability that robotaxis are viable

ARK also predicted that Tesla’s insurance business could achieve better than average margins, based on the highly detailed information it collects on its vehicles,

Last year, ARK predicted that Tesla’s share price would hit $7,000 per share, or $1,400 adjusted for its five for one stock split.

According to ARK’s new model, in the best case scenario, Tesla could reach $4,000 per share in 2025, and in the bear case, $1,500 - twice its current levels.

The $3,000 target price would give the company a market capitalisation of almost $3trn.

Bloomberg points out that this puts ARK a long way ahead of other analysts:

Analysts have speculated about the prospect that Tesla will launch a robotaxi service since at least 2015, but there’s little indication its technology is close to making this possible anytime soon. Tesla recently told California authorities that human drivers will still need to constantly supervise a new city streets function within its “full self-driving” suite of features sold as part of its Autopilot package.

As for the company’s insurance product, that began in August 2019 and is currently available only in California.

The FT’s Jamie Powell says there are some holes in the analysis, for example...

To start, ARK forecasts that Tesla’s almost non-existent insurance business could generate revenues of $6bn by 2025, with 40 per cent operating margins, more than three times the margins of auto insurance heavy weight Progressive.

Somehow, we are led to believe, it might manage to do this without having to meet the regulatory capital requirements that are de facto part of the business.

In New York, tech stocks have opened higher in early trading, as US government bonds recover from last week’s fall.

The technology-focused Nasdaq is up 102 points, or 0.77%, at 13,317.

But the Dow Jones industrial average, which contains 30 major US companies, has dropped by 59 points or 0.2% to 32,568 points.

Chipmaker Intel (+2.3%) is the top riser, followed by Apple (+1.3%), while banks and industrial groups are dropping.

The broader S&P 500 index is up 0.2%.

Equity traders will be watching the bond market closely, where the yield (rate of return) on US Treasury bonds surged to 14-month highs last week, as expectations of rising inflation grew.

Today, the yield on 10-year Treasuries has dropped to around 1.69%, having hit 1.75% last week, meaning the selloff has abated (yields rise when prices fall).

22 Mar 202109.16 EDT

Larry Elliott

A year of Covid-19 lockdowns has cost the UK economy £251bn – the equivalent of the entire annual output of the south-east of England or nearly twice that of Scotland, according to a report published on Monday.

Analysis by the Centre for Economics and Business Research found that while the whole of the country had suffered huge damage from restrictions on activity since the first national lockdown began, some poorer regions had suffered the most.

The consultancy said the north-south gap would widen unless the government took steps to ensure that the less well-off parts of the UK did not disproportionately bear the economic losses caused by the pandemic....

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