* Turkish lira skids as Erdogan dumps central banker
* Bond yields down, equity moves mostly modest so far
* Oil prices slip anew, after steep slide last week
* Global currencies vs dollar https://tmsnrt.rs/2PmYOcE
By Wayne Cole and Lawrence White
SYDNEY/LONDON, March 22 (Reuters) - The fallout from
Turkey's latest market drama appeared contained on Monday, as
stocks recovered from President Tayyip Erdogan's shock replacing
of a hawkish central bank governor with a critic of high
interest rates.
An index of Europe's 600 largest stocks .STOXX hovered
either side of flat by 1058 GMT, erasing earlier losses. Euro
zone government bond yields fell slightly and other emerging-
market currencies largely avoided contagion.
Erdogan's move most affected domestic assets. The lira fell
15% TRYTOM=D3 to 8.485 against the dollar, its worst plunge
since the last Turkish crisis of 2018, before the currency
recovered on calming words from Finance Minister Lutfi
Elvan. By 1058 GMT, the currency traded at 7.950 after Elvan said
Turkey would stick to free-market rules, damping down fears of
currency controls. Turkish sovereign bond yields soared above 18%, hitting a
22-month high.
Meanwhile, euro zone banks exposed to the country such as
Spain's BBVA BBVA.MC , Italy's UniCredit CRDI.MI , France's
BNP Paribas BNPP.PA , and Dutch bank ING INGA.AS fell between
1.6% and 5.2%.
The MSCI emerging-market currency index .MIEM00000CUS was
down about 0.1%, with such high-yielding currencies as the South
African rand ZAR= and the Mexican peso MXN= down about 0.8%
and 1.4%, respectively. The ripples were more modest elsewhere. U.S. stock futures
ESc1 were up while yields on 10-year Treasury notes
US10YT=RR edged down five basis points to 1.68%, suggesting
some investors 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 strengthen, with
notable gains on the euro EURJPY= and Australian dollar
AUDJPY= .
After an initial slip, the dollar steadied at 108.80 yen
JPY= . The dollar index was down slightly at 91.942 =USD .
Also supporting the yen were concern that Japanese retail
investors who 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 0.65% to $1,734 an ounce XAU= .
Oil prices teetered on renewed concerns that European
coronavirus lockdowns could slow any recovery in demand for fuel
products. O/R
Brent crude LCOc1 was down 13 cents, or 0.2%, at $64.4 a
barrel by 1103 GMT>. U.S. oil CLc1 recovered some earlier
losses to rise 24 cents to $61.28, after both contracts had
fallen by more than 6% last week.
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Asia stock markets https://tmsnrt.rs/2zpUAr4
Turkey sovereign bond yields https://tmsnrt.rs/3lE84WP
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