AFP, London :
Asian and European equities were hesitant Monday as traders balanced vaccine-driven optimism against fears of spiking inflation – and also tracked brewing turmoil in Turkey, dealers said.
Asia and Europe faltered after a largely negative pre-weekend lead from Wall Street, despite global stimulus programmes aimed at countering the massive economic fallout from the coronavirus pandemic.
Oil prices were mixed and the dollar steadied against the euro and yen.
The Turkish lira meanwhile plunged nearly 15 percent in early trade after President Recep Tayyip Erdogan sacked the country’s market-friendly central bank chief Naci Agbal and replaced him with former ruling party lawmaker Sahap Kavcioglu.
The currency fell as low as 8.47 per dollar on Monday, having closed at 7.22 at the end of last week. It later recovered slightly.
Erdogan’s move has thrown the independence of the central bank into question and raised fears of a new bout of financial turbulence in the country that could have repercussions worldwide.
“Vaccination programmes, fresh fiscal stimulus and ongoing monetary stimulus from central banks are all fuelling hopes for a strong bounce back in economic output and corporate profits,” said AJ Bell investment director Russ Mould.
“But this means investors are potentially more exposed now to unexpected shocks – and Turkey could yet provide one.
“One thing that could be capable of knocking markets off their stride – beyond a resurgence of the virus – is an old-fashioned emerging markets wobble,” Bell warned.
While a presidential decree on Friday did not explain why Agbal had been removed, it came just a day after the Turkish central bank hiked interest rates a much more than expected two percentage points to 19 percent to fight inflation.
After a year-long rally, investors are now struggling to maintain the momentum as US government bond yields push ever higher – a sign that Federal Reserve interest rates will rise in the future to combat mounting inflationary pressures.
The sharp rise in US Treasury yields – which go in the opposite direction to prices – is being caused by investors selling the bonds owing to expectations the strong recovery and vast government spending will fire inflation higher.
