U.S. stocks poised to come under pressure as Turkey weighs on global markets
U.S. stock indexes appeared set to stumble early Monday as turmoil in Turkey eroded appetite for risk on Wall Street.
Futures for the Dow Jones Industrial AverageYMU8, -0.31% were off 94 points, or 0.4%, at 25,235, those for the S&P 500 index ESU8, -0.27% traded 9.30 points lower at 2,827, a decline of 0.3%, while the Nasdaq-100 futures NQU8, -0.32% shed 28.50 points to reach 7,389.75, a slide of 0.4%.
On Friday, the S&P 500SPX, -0.71% lost 20.30 points to 2,833.28, a slide of 0.7%, marking its third straight down session and the worst one-session slump since June 27, according to Dow Jones Market Data—a statistic that highlights the narrow range the broad-market index has traversed in the past several weeks.
The Dow Jones Industrial Average DJIA, -0.77% fell 196.09 points, or 0.8%, to 25,313.14. Friday was the Dow’s third straight daily decline, as well as its biggest one-day percentage fall since July 11. Friday’s decline pushed the Dow to a 0.6% loss for the week.
The Nasdaq Composite Index COMP, -0.67% fell by 52.67 points to 7,839.11, a retreat of 0.7% that scuttled an attempt at an nine-session win streak for the technology-heavy benchmark. Still, the index’s advance last week helped it to retain a weekly gain of 0.4%.
U.S. investors kept their attention trained on developments in Turkey to kick off the week. The Turkish central bank pledged to provide “all the liquidity the banks need” in a statement Monday. It also said banks would be able to borrow foreign-exchange deposits from the central bank at a one-month maturity and one-week maturities. Analysts said Turkey’s reluctance to raise interest rates stood out.
However, those events failed to curb concern about the possible contagion from Turkey’s currency crisis, with market participants fretting that Ankara’s tumble in its lira USDTRY, +7.3186% could ripple though financial markets, hurting emerging-market economies, as well as those in Europe, subjected to bank exposure in particular.
On Monday, the Turkish lira extended its slide, with one dollar buying 6.8475 lira, compared against 6.4275 late Friday, a decline of 6.4% for the monetary unit after plunging about 14% on Friday. At its lows, a dollar bought 7.1310 lira.
“The Turkish lira continues to plunge, having hit an all-time low of 7.121 against the dollar. Whilst the country’s economic fundamentals, especially high inflation can, to some extent, explain the reaction of the markets, it appears that speculation may be having a compounding effect. From a global perspective the greatest risk lies in contagion to other emerging countries and even to European assets as some banks are reported to have large exposure to Turkey,” wrote Ricardo Evangelista, senior analyst at U.K. based online broker ActivTrades in a Monday research note.
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