Australian stocks, like New Zealand’s, held up much better than most other markets in the region as Down Under again proved today to be relative safe havens amid geopolitical worry. The S&P/ASX 200 fell 0.4% to 6252.2. While the materials sector slid 1.3%, energy edged higher and consumer stables shed just 0.1%. Helping was fresh declines in the Aussie dollar, which hit the lowest levels since the start of 2017 versus the greenback in dropping below US$0.73. Ear-implant company Cochlear climbed 1% and accounting-software firm Xero rose 2.2%. But Sims Metals slumped 8.7%.
The S&P 500 fell intraday, weighed down by shares of materials companies as oil prices ebbed lower. An economic crisis in Turkey continued to spill over to global markets, leading investors to flee riskier assets like stocks. Falling oil prices to start the week also put pressure on shares of energy and materials companies. The S&P 500 fell 0.1%, while the Dow Jones Industrial Average lost about 0.2%. The technology-heavy Nasdaq Composite inched higher 0.1%. The move lower for the Dow and S&P comes after they finished their worst weeks in more than a month. Other global stock markets also declined Monday as Turkey’s economic turmoil and fears of possible contagion continued to strain markets and drove investors to safer assets. The Turkish lira plunged 7.2%, after falling as much as 10% in Asian morning trading. One dollar buys 6.9 lira. Those losses come on top of Friday’s 13.8% decline. The lira’s lurch lower has raised fears that Turkey may not be able to pay back debt denominated in other currencies and rattled other emerging markets, too. On Monday, Turkey’s central bank said it would provide liquidity to banks as needed, according to a statement on its website, and announced a set of measures to support the lira. But a defiant speech from President Recep Tayyip Erdogan and policy moves from the nation’s central bank didn’t mollify investors about the country’s fiscal condition. Some indicators show “the situation isn’t getting any better,” said Charlie Ripley, senior market strategist at Allianz Investment Management. For example, Italian bond prices slumped Monday as yields rose, an indication that Turkey’s stress continued to creep through global markets, Mr. Ripley said.
Gold prices fell to the lowest point in 18 months as a rising dollar outweighed concerns about geopolitical tension between the U.S. and Turkey. Front-month gold contracts for August delivery fell 1.6% to $1,191.30 a troy ounce at the Comex division of the New York Mercantile Exchange on Monday, the lowest close since January 2017. The more active October contract slid 1.7%. Traders focused on a diplomatic dispute between the U.S. and Turkey, which raised the prospect of an economic crisis in the country that could spill over into Europe and other emerging markets. While political and economic uncertainty often attracts risk-averse traders to gold, the strength in the U.S. dollar limited demand for the precious metal. Copper prices were also under pressure from the strength in the greenback. August-dated contracts fell 0.4% to $2.722 a pound, with the more-active September contract also down 0.4%. Investors were awaiting the end of the first period of government-mediated talks between BHP Billiton and unions at its Chilean Escondida operation, the world’s largest copper mine. A strike is likely in the event talks remain inconclusive, analysts said. Observers were also looking out for Chinese economic figures this week, with new loan, monetary supply and industrial-production numbers all due out Tuesday. Any signs of headwinds for the Chinese economy could add to pressure on the copper market.
IRON ORE: 69.08s + 0.28(September contract)
Oil prices erased most of their losses and closed slightly lower as traders weighed fresh OPEC supply data and continued strength in the dollar. Light, sweet crude for September delivery closed down 43 cents, or 0.6%, at $67.20 a barrel on the New York Mercantile Exchange, after falling as much as 2.8% earlier in the session. Brent crude, the global benchmark, inched down 20 cents, or 0.3%, to $72.61 a barrel. Both benchmarks have fallen 9% from their multiyear highs hit earlier in 2018, hurt in recent weeks by the prospect that higher output from Saudi Arabia and other large producers will ease fears of a supply shortage. Data Monday showed crude oil output from the Organization of the Petroleum Exporting Countries ticked up slightly in July even as production in Saudi Arabia-the de facto leader of the group-declined. Investors have also had to monitor recent trade tensions and weakness in emerging markets like Turkey, factors that could lower demand and continue boosting the dollar. A stronger dollar makes commodities priced in the U.S. currency more expensive for overseas buyers. On Monday, the WSJ Dollar Index, which tracks the dollar against a basket of 16 other currencies, rose 0.4% coming off its highest close since May 2017. Still, oil prices started the day higher before plunging then recovering late in the session. Some analysts expect them to remain volatile, with uncertainty still surrounding U.S. sanctions against Iran, the speed at which large suppliers will boost output and global trade policies that could impact consumption. The International Energy Agency on Friday raised its forecast for global oil demand growth by 110,000 barrels a day to 1.5 million barrels for 2019.
Emerging market currencies slid intraday, weighed down by investor concerns that a selloff in the Turkish lira could spread to other countries. The dollar was recently up around 2.5% against the South African rand and rose 2.7% against the Argentine peso while notching big gains against a broad range of other emerging market currencies. Turkey’s lira was recently down around 8% against the dollar after policy moves from the nation’s central bank failed to calm rattled investors. The lira is down more than 40% this year, battered by concerns about the NATO member’s political and economic stability and a continuing trade spat with the U.S. The lira’s volatility “continues to roil financial markets around the world and support demand for safe-havens,” analysts at Scotiabank said in a note to clients. The dollar fell 0.2% to ¥110.69 against the Japanese yen, a popular destination for nervous investors. It fell 0.2% against the Swiss franc to 0.9938.
The Stoxx Europe 600 closed down 0.25% at 384.91 as pharma giant Bayer slid while concerns about contagion risks in the region weighed on banking stocks. Bayer was the biggest faller, down 10.3% after recently bought Monsanto Co. was ordered to pay $289.2 million after a California state jury found Monsanto’s weed killers caused cancer. Among banking stocks, Spain’s BBVA wass down 3.2%, Italy’s UniCredit off 2.6% and BNP Paribas backtracked 1% due to concerns about their exposure to Turkey. Germany’s DAX ended 0.5% lower, France’s CAC 40 down 0.04%, and the U.K.’s FTSE 100 down 0.3%. Italy’s FTSE MIB ended down 0.6% and Spain’s Ibex 35 down 0.75%.
Asian shares took a hit as market turmoil surrounding Turkey’s plunging lira persisted, with many of the region’s benchmark stock indexes closing down at least 1%. The Shanghai Composite Index closed 0.3% lower and Hong Kong’s Hang Seng finished down 1.5%. Amid a noted risk-off market climate globally amid Turkey’s travails, Japanese stocks were among Asia’s bigger decliners today as the yen received noted safe-have flows. The Nikkei dropped 2% to 21857.43 as the yen widely rose at least 0.5% versus other major currencies.