Financial market research and analysis

Concerns over China’s economic health and the precarious state of the Turkish financial system and what the implications could be for global markets ensured a negative session for Wall Street. After the Lira moved higher, the initial fear of US & European banks taking a hit from bad Turkish loans has cooled. The focus is moving beyond the Lira; the overriding fear now is that Turkey’s problems will spill over into emerging markets damaging global growth and hitting risk appetite, ultimately lowering demand for assets across the board.

The FTSE Emerging Index is now 20% lower than its peak on January 26, meaning it has officially entered a bear market. Emerging markets have been under significant pressure recently with escalating trade tensions and rising US interest rates weighing on demand.  Whilst EM’s are looking wobbly, traders are being drawn towards the US dollar for its safe-haven status and the likely prospect of continued hiking action from the Fed. The dollar rallied to a 13-month high versus a basket of currencies before easing back slightly overnight.

So, whether its Turkey or concerns over growth in China, fears that global growth will start slowing hit sentiment and particularly commodities, given that emerging markets are a major source of demand.  Copper, also referred to as Doctor Copper as it is often seen as a leading indicator of future economic trends, hit its lowest level in 13 months and entered a bear market, which doesn’t bode well for the future.

Qatar To Shore Up Turkey

Fortunes reversed after Qatar announced an investment of $15 billion into Turkey, to shore up its finances; a move that has gone down well with investors. After the triple-digit decline on the Dow, Asian markets are trading higher and Europe is pointing to a positive start, clawing back the losses from the previous session. The pledge of cash by the oil-rich state serves to remind us of the of the key geographical position of Turkey. Turkey’s President Erdogan is now reaping the rewards for standing by Doha in its recent spat with Saudi Arabia.

Brexit Talks & Retail Sales to Keep Pound Depressed?

UK retail sales are expected to rise 0.2% month on month in July after unexpectedly falling -0.5% in June. Whilst hopes had been high that the World Cup and hot weather would have boosted beer and BBQ sales in June, the lift didn’t materialise. July was the knock out phase and although England did well making it through to the semi’s, this is unlikely to have translated into strong retail sales. The British Retail Consortium retail sales figures painted a similar picture with concerns growing for the outlook.

With the next round of Brexit talks due to begin today, any retail sales data, good or bad could be quickly overshadowed by growing fears of the UK crashing out of the European Union without a deal. The pound has dived over the past two weeks as investors accept the increasingly likely reality that no deal will be struck before the self-imposed deadline; any headlines supporting this could see the pound fall further. At these levels, the pound still hasn’t fully priced in a hard Brexit.

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