Turkey’s currency and stocks collapsed after the abrupt termination of its central bank head, a move that led investors to take a cautious stance toward risky assets on Monday.
The dollar USDTRY, +9.98% rose by as much as 15% vs the Turkish lira, and the BIST-100 stock-market index XU100, -8.60% traded 8% lower after President Recep Tayyip Erdogan’s decision to replace Governor Naci Agbal with Sahap Kavcioglu — the third change at the Central Bank of the Republic of Turkey (CBRT) in two years. Turkey’s central bank last week hiked interest rates by 2 percentage points to 19%, a full percentage point more than expected.
“With Naci Agbal’s removal from the CBRT, Turkey loses one of its last remaining anchors of institutional credibility,” said Phoenix Kalen, a strategist at French bank Societe Generale. “During his short tenure, Agbal had succeeded where various predecessors had not – in cultivating trust in the central bank’s inflation-targeting framework, in restoring monetary policy independence, in encouraging international investors to re-engage with the crisis-prone Turkish narrative, in driving an 18.0% rally in the lira against the dollar, and most crucially – in arresting and even reversing the damaging trend of dollarization in the economy.”
The moves in Turkey sent traders into safe-haven currencies such as the dollar DXY, +0.01% and the Japanese yen USDJPY, -0.13%, and away from emerging-market currencies including the Mexican peso USDMXN, +1.06%, the South African rand USDZAR, +0.24% and the Russian ruble USDRUB, +0.44%.
BBVA BBVA, -6.11%, which owns just under half of Turkey’s Garanti BBVA, tumbled 7% in Madrid.
That caution spread to stocks, where the Stoxx Europe 600 SXXP, -0.03% and U.S. stock futures ES00, +0.05% were fractionally higher.
Airline stocks including International Airlines Group IAG, -4.50%, easyJet EZJ, -5.47% and Ryanair RYA, -3.80% skidded after scientific advisors were reportedly urging U.K. Prime Minister Boris Johnson not to lift a ban on foreign holidays. That comes as the European Union has struggled in its vaccination campaign and is now considering blocking exports of AstraZeneca-made vaccines to the U.K.
Shares of AstraZeneca AZN, +1.39%, which separately reported that its vaccine, made with Oxford University, was 79% effective in preventing COVID-19 and 100% effective in preventing severe disease in a U.S. trial, rose 1.1%.
Volkswagen VOW3, +5.58% and its majority owner Porsche Automobil Holding PAH3, +5.72% both advanced, continuing their stellar run since VW laid out its electric vehicle and battery plans. Analysts at Deutsche Bank hiked its price target on VW by 46% and on Porsche by 38%. “With the global roll-out of the ID.4 we see a good chance that VW could surpass Tesla’s TSLA, +0.26% [battery electric vehicle] sales as soon as next year, which should increase the credit given to its EV strategy,” said the analysts.
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