Turkey turmoil sends ripples across world stock markets, euro falls

Turkey fails to resolve disputes with US

A diplomatic tussle between the USA and its North Atlantic Treaty Organisation ally deepened Friday after President Donald Trump said he had authorized the doubling of tariffs on Turkish steel and aluminum.

On March 1, Trump had announced global tariffs of 10 percent on all aluminum to the US and 25 percent on all steel imports.

Trump is also declaring that, "Our relations with Turkey are not good at this time!"

The value of the Turkish lira has dropped sharply, ramping up fears of a contagion effect across emerging markets that could damage the world economy.

Aluminium will now be 20 per cent and Steel 50 per cent.

A financial shockwave ripped through Turkey on Friday, when its currency nosedived on concerns about its economic policies and a dispute with the USA, which President Donald Trump stoked further with a promise to double tariffs on the North Atlantic Treaty Organisation ally.

'If there is anyone who has dollars or gold under their pillows, they should go exchange it for liras at our banks.

A plunge in the Turkish lira rocked global equities and emerging markets on Friday and fear of further fallout sent investors scurrying for safety in assets like the yen and USA government bonds.

Turkish President Recep Tayyip Erdogan addresses his supporters in Bayburt, Turkey, Aug. 10, 2018.

The lira slid to a fresh record low against the USA dollar.

Canada's main stock index also fell on Friday. USA stocks were also rattled, with banks again in focus.

"Various campaigns are underway against Turkey, pay no attention to them". The predictable result is this has made inflation get out of control - it is up to 15.9 percent when they are supposedly trying to keep it to 5 percent - because the central bank has been so slow to raise rates, and, in fact, refused to do so at its most recent meeting.

"We think that Turkey has a toxic combination of a weak external position (current account deficit), excessive private sector debt and a high level of foreign funding in the banking system".

The ratio of foreign holdings of government debt stood at just under 20 percent at the end of last month - largely unchanged from 22 percent in late February. Earlier, it had crashed some 12 percent through the 6.00 level for the first time in history, trading at one point at more than 6.20 lira per dollar.

Erdogan's characteristic defiance in the face of the crisis has further unnerved investors.

Turkey's woes have been aggravated by investor worries about the economic policies of Erdogan, who won a new term in office in June with sweeping new powers.

Erdogan's decision to name his son-in-law as finance minister also made people wonder about the direction of the country's economic policy.

While Turkey and the United States are at odds over a host of issues, the most pressing disagreement has been over the detention of U.S. citizens in Turkey, notably Christian pastor Andrew Brunson who is on trial on terrorism charges.

While there was no statement from the Turkish side, US State Department spokesperson Heather Nauert said wide-ranging conversations had been held. The U.S. recently hit two high-ranking Turkish officials with sanctions after the Turkish government refused to release imprisoned Christian pastor Andrew Brunson.

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