Turkish jitters knock European stocks into the red

They sent the FTSE 100 down more than 0.3% on Monday.

The Turkish lira has already fallen nearly 50% in the past year and was facing further pressure on Monday (Andrew Parsons/PA)
The Turkish lira has already fallen nearly 50% in the past year and was facing further pressure on Monday (Andrew Parsons/PA)

London’s blue chip index fell into the red as investors worried over whether a financial crisis in Turkey could spread across Europe.

The FTSE 100 ended the day down 0.3% or 24.56 points at 7642.45.

Its European peers were not faring much better, with the French CAC 40 down 0.04% and the German DAX down more than 0.5%.

Investors were keeping a close eye on Turkey, which has been rattled by a standoff with the US over its detention of an American evangelical pastor.

That has compounded fears over the country’s high inflation levels, current account deficit and growing private sector debt.

The Turkish lira has already fallen nearly 50% in the past year and was facing further pressure on Monday despite a pledge by Turkey’s central bank to provide liquidity to the country’s banks.

Michael Hewson, chief market analyst at CMC Markets, said: “While on its own this crisis may well seem contained, and small in nature, there does appear to be a sense that this was yet another reason for investors to take a step back.

Fears over contagion from Turkey hit the FTSE 100 (PA)

“Against an already difficult geopolitical backdrop, coming as it has on the back of rising concerns over an escalation between the US and China on trade, the implementation of new sanctions against Russia last week, this growing crisis in Turkey appears to be giving investors too many balls to juggle, hence this latest bout of risk aversion, which is also having some ripple-out effects into other currencies including the South African rand.

“The bigger concern is that last week’s tariff escalation by the US could merely be the beginning of further measures to exert economic pressure on Turkey, which in turn could create further ripple-out effects.”

Turkey’s woes also piled pain on commodities, helping send Brent crude prices down more than 0.8% to 72.29 US dollars per barrel, as investors worried about how contagion could impact global demand.

The simmering trade spat between the US and China also threatened to dent global growth and appetite for oil.

In currency markets, the pound was hovering at its lowest level since June 2017 as it traded nearly flat against the US dollar at 1.276.

Against the euro, sterling was up around 0.1% at 1.118.

In UK stocks, Clarkson jumped 170p to 2,755p despite seeing pre-tax profts dip from £21.9 million to £18 million in the first half of the year.

The figures come after Clarkson issued a profit warning in April, saying that earnings for both the first half and the full year were likely to be “materially below those of last year”.

Chemring tumbled 29p to 207p, having confirmed that it could take a £20 million hit after one employee died and another was hurt in an accident at its site near Salisbury on Friday.

Esure surged 63.2p to 267.2p after the insurer said it is in advanced discussions over a £1.2 billion takeover by private equity firm Bain Capital.

The board of esure has indicated to Bain Capital that it would be “minded to recommend” a firm offer.

The biggest risers on the FTSE 100 were Evraz up 10.6p at 520.6p, Admiral Group up 32p at 2,019p, Direct Line Insurance up 4.8p at 327.3p, and Hargreaves Landsdown up 30p at 2,121p.

The biggest fallers on the FTSE 100 were TUI down 39p at 1,526.5p, Paddy Power Betfair down 135p at 7,120p, GVC Holdings down 20p at 1,105p, and Next down 100p at 5,568p.

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