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GLOBAL MARKETS-Asia stocks hesitant as bonds boosted by Turkish tumult

Published 03/22/2021, 12:44 PM
Updated 03/22/2021, 12:50 PM
© Reuters.
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* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Turkish lira skids as Erdogan dumps central banker
* Bond yields down, equity moves mostly modest so far
* Yen makes some gains, eyes on Japanese retail investors
* Oil prices slip anew, after steep slide last week

By Wayne Cole
SYDNEY, March 22 (Reuters) - Asian stocks turned mixed and
bonds bounced on Monday as a plunge in the Turkish lira sparked
talk that capital controls might be needed to stem the rout,
though the wider fallout was relatively restrained for the
moment.
The dollar was trading almost 12% higher versus the lira
TRYTOM=D3 at 8.0520, the sharpest move since August 2018 when
Turkish markets were in another of their periodic crises.
The slide came after President Tayyip Erdogan shocked
markets by replacing Turkey's hawkish central bank governor with
a critic of high interest rates. "The authorities will be left with two choices, either it
pledges to use interest rates to stabilise markets, or it
imposes capital controls," said Per Hammarlund, senior EM
strategist at SEB Research.
"Given the increasingly authoritarian approach that
President Erdogan has taken, capital controls are looking like
the most likely choice."
The uncertainty saw Japan's Nikkei .N225 fall 1.6%, partly
on speculation Japanese retail investors could face losses on
large long positions in the high-yielding lira.
The ripples were more modest elsewhere with MSCI's broadest
index of Asia-Pacific shares outside Japan .MIAPJ0000PUS
actually adding 0.3%, aided by a 0.7% rise in Chinese blue chips
.CSI300 .
EUROSTOXX 50 futures STXEc1 eased 0.3% and FTSE futures
FFIc1 0.2%. Nasdaq futures NQc1 firmed 0.6%, while S&P 500
futures ESc1 dithered either side of flat.
Yields on 10-year Treasury notes US10YT=RR edged down five
basis points to 1.68%, suggesting some favoured safe havens.
Investors are still struggling to deal with the recent surge
in U.S. bond yields, which has left equity valuations for some
sectors, particularly tech, looking stretched.
Bonds had another wobble on Friday when the Federal Reserve
decided not to extend a capital concession for banks, which
could lessen their demand for Treasuries. The damage was limited, however, by the Fed's promise to
work on the rules to prevent strains in the financial system.
A host of Fed officials speak this week, including three
appearances by Chair Jerome Powell, providing plenty of
opportunity for more volatility in markets.

WATCHING EMERGING MARKETS
Monday's tumble in the lira saw the yen firm modestly, with
notable gains on the euro EURJPY= and Australian dollar
AUDJPY= . That in turn dragged the euro down slightly on the
dollar to $1.1890 EUR=D3 .
After an initial slip, the dollar soon steadied at 108.80
yen JPY= , while the dollar index was down slightly at 91.973
=USD .
Also supporting the yen were concerns Japanese retail
investors that have built long lira positions, a popular trade
for the yield-hungry sector, might be squeezed out and trigger
another round of lira selling.
Still, analysts at Citi doubted that the episode would lead
to widespread pressure on emerging markets, noting the last time
the lira slid in 2020, there was little spillover.
"In terms of impact on other parts of the high-yielding EM,
we believe that will be quite limited," Citi said in a note.
There was scant sign of safe-haven demand for gold, which
eased 0.2% to $1,741 an ounce XAU= .
Oil prices fell anew, having shed almost 7% last week as
concerns about global demand prompted speculators to take
profits on long positions after a long bull run. O/R
Brent LCOc1 was off 32 cents at $64.21 a barrel, while
U.S. crude CLc1 for May fell 33 cents to $61.10.

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Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
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