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Global Markets: Asian shares, euro trampled as Turkish rout spreads

Reuters  |  SYDNEY 

By Wayne Cole

SYDNEY (Reuters) - share markets skidded and the hit one-year lows on Monday as a renewed rout in the infected the and drove demand for safe harbours, including the U.S. dollar, Swiss franc and yen.

The run from risk dragged MSCI's broadest index of shares outside down 1.3 percent to a five-week low. Japan's Nikkei lost 1.6 percent with every bourse in the region in the red.

EMini futures for the were off 0.4 percent, while 10-year Treasury yields dipped further to 2.85 percent.

China's blue chip index shed 1.4 percent, while Hong Kong stocks lost 1.6 percent as the local dollar fell to the limits of its trading band.

Much of the early action was in currencies with the gapping lower as the took another slide to all-time lows around 7.2400.

The lira found just a sliver of support when Turkish said the country had drafted an action plan to ease investor concerns and the watchdog said it limited swap transactions.

Yet the dollar was still up almost 10 percent on the day at 7.0000 lira. This time last month it was at 4.8450.

The tumbled on worries over Turkish Tayyip Erdogan's increasing control over the and deteriorating relations with the

"The plunge in the lira which began in May now looks certain to push the Turkish into recession and it may well trigger a crisis," said Andrew Kenningham, at

"This would be another blow for as an asset class, but the wider economic spillovers should be fairly modest, even for the zone," he added.

Kenningham noted Turkey's of around $900 billion was just 1 percent of the global and slightly smaller than the

The Turkish equity market was less than 2 percent of the size of the UK market, and only 20 percent was held by non-residents, he added.

"Nonetheless, Turkey's troubles are a further headwind for the euro and are not good for EM assets either."

BANKS EXPOSED

Indeed, the single sank to a one-year trough against the Swiss franc around 1.1300 francs, while hitting a 10-week low on the yen around 125.45.

Against the U.S. dollar, the euro touched its lowest since July 2017 at $1.13700. It was last at $1.1380 and still a long way from last week's top at $1.1628.

The dollar eased against the safe haven yen to 110.21, but was a shade firmer against a basket of currencies at 96.431.

The Argentine peso and were also caught in the crossfire, with the dollar adding 5 percent on the rand. Dealers said Japanese had been squeezed out of long positions in the rand sending the yen steaming higher.

"Contagion risks centre on Spanish, Italian and French banks exposed to Turkish foreign debt, as well as and South Africa," warned analysts at

"Turkey's massive pile of corporate debt denominated in foreign currencies, but a rapidly sliding currency - and inflation that's threatening to go exponential - is a toxic combination."

In commodity markets, gold found little in the way of safety flows and was last down at $1,208.21 an ounce.

were mixed with Brent off 14 cents at $72.67 a barrel, while U.S. crude added 2 cents to $67.65.

(Editing by and Eric Meijer)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, August 13 2018. 08:45 IST
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