London | US and European stocks wobbled yesterday on investor concerns over Turkey and the ongoing trade war between China and the United States.
A rebound in the Turkish lira was cut short by new threats by Ankara and Washington to impose more sanctions as the dispute over a jailed American pastor shows no sign of being resolved.
After spending most of the session lower, London’s blue-chip FTSE-100 rallied in the final minutes of trading to close a couple points higher. Paris closed marginally lower, while Frankfurt dipped 0.2 percent.
On Wall Street, stocks were also mixed in late morning trading, with the Dow up a tenth of a percentage point.
Asian stocks however, rallied after a positive lead from Wall Street overnight, with dealers cautiously optimistic about upcoming US-China trade talks — although worries festered over the future for emerging markets as a whole.
“The heightened tensions between the US and Turkey caused the Turkish lira to take a leg lower, and this reignited fears that the European banking system could be shaken by either defaults or non-performing loans from Turkey,” said market analyst David Madden at CMC Markets UK.
Turkey on Friday vowed to respond if the United States followed through on its threat to levy further sanctions if it does not release the American pastor being held on terror charges.
After having clawed back most of its losses on Friday and Monday, when it shed 20 percent of its value against the dollar, the lira began falling again on the new sanctions threats, dropping by five percent at one point.
“The currency is not out of the woods yet and sellers are pushing to see at which level it will hold,” said City Index analyst Fiona Cincotta.
The prospect of the United States and China returning to the table instead of trading tariff increases brought some relief to investors.
“Global trade worries have not disappeared,” said OANDA analyst Dean Popplewell.
“For now, the possibility of a Sino-US trade deal has brought some calm to the market — but trade and currency wars remain,” he added.
Negotiators from Washington and Beijing will meet later this month for the first publicly announced dialogue in weeks on their bitter trade dispute, which has seen both sides impose reciprocal tariffs on goods worth 34 billion.
The news helped global markets regain composure after several days of volatility sparked by fears that Turkey’s financial crisis could infect other economies.
“Markets are optimistic but remain wary,” said FXPro analyst Alexander Kuptsikevich.
“It is worth noting that the status of officials involved in the (US-China) negotiations is not very high, which eliminates the possibility of breakthrough decisions in the near future.” Tit-for-tat tariffs by the US and China on another 16 billion of each other’s goods are due to kick in next week, and President Donald Trump has threatened to go after even more Chinese imports in the future.
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