The Turkish lira, which fell to a record low of 7.24 to the dollar earlier this week, recovered 8 percent overnight. While this seemed to convince Wall Street that fears of broader financial contagion had passed, it was not enough to satisfy Asian traders.
The MSCI’s broadest index of Asia-Pacific shares outside Japan slid 0.8 percent after bouncing 0.4 percent the previous day when the lira showed signs of stabilising.
Hong Kong was down more than 1 percent and the Shanghai Composite Index fell 0.1 percent.
“The lira rallied yesterday, but there is not (a) remedial plan for Turkey’s internal and external imbalances. Europe’s banks will have to reserve more against these potential losses, and already low capital adequacy ratios will be tested,” Carl Weinberg, chief international economist at High Frequency Economics, was quoted as saying in a Reuters report.
Middle East markets
Qatar and Saudi stocks matched Wall Street’s stance and rose modestly on Tuesday, pulling back some recent losses.
As the Turkish currency stabilised, Qatar stocks ended 0.9 percent higher, helped by a 1.5 percent rebound in Qatar National Bank, which has a Turkish subsidiary and had fallen over the last few days.
Saudi Arabia's stock index climbed 0.3 percent, with its biggest bank, National Commercial Bank, rising 0.7 percent. Arqaam Capital estimated NCB's exposure to Turkey at 8 percent of its assets and 12 percent of its loans.
Dubai's stock index ended slightly lower as its top bank, Emirates reversed earlier gains to end 1.9 percent lower. In May, Emirates NBD agreed to buy Turkey's Denizbank in a $3.2 billion deal.
Loss-making builder Drake & Scull jumped 1.3 percent from a record low and was the market's most heavily-traded stock. It appointed Yousef Al Mulla as chief executive, replacing Fadi Feghali who took over only in April, and said it was devising a fresh restructuring plan.
Emaar Properties reported a 16 percent year-on-year rise in second quarter profits, pushing its stock up 0.4 percent, while Damac Properties lost 0.5 percent after it reported Q2 profit was down 46 percent and it had registered its worst quarter for booked sales since going public five years ago.
Elsewhere, Abu Dhabi was up 0.6 percent, Kuwait was flat, Bahrain fell 0.4 percent, Oman was down 0.2 percent and Egypt tumbled 1.1 percent.
Oil prices fell on Wednesday, pulled down by increased inventories in the United States and concerns that a pessimistic global economic outlook would dent demand.
Brent crude oil futures LCOc1 were at $72.14 per barrel at 0021 GMT, down by 32 cents, or 0.4 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were down 34 cents, or 0.5 percent, at $66.70 per barrel.
U.S. crude stocks rose by 3.7 million barrels in the week to August 10, to 410.8 million barrels, private industry group the American Petroleum Institute (API) said on Tuesday.
“Oil prices ... fell after the API inventory data showed an unexpected crude build last week,” William O’Loughlin, investment analyst at Australia’s Rivkin Securities, told Reuters.
The dollar soared to a near-13 month high against a basket of major currencies on Wednesday as it emerged as the safe-haven of choice amidst fears for emerging market currencies.
The greenback’s strength was bolstered by the euro’s fall, which has been dogged by concerns over the exposure of European banks to financial turmoil in Turkey.
“In light of all the turmoil we’ve seen out of Turkey and the subsequent contagion into other emerging markets, the dollar is pretty much establishing itself as the safe-haven currency,” Bart Wakabayashi, Tokyo branch manager at State StreetBank, told Reuters.
On Wednesday, an index that tracks the dollar against the euro, yen and four other currencies was flat at 96.729, hovering near a 13-month high of 96.794 reached the previous day.
The Turkish lira stabilised after rebounding more than 8 percent overnight.
The British pound was frail, sliding back to a 13-month low of $1.2704 touched overnight after weaker-than-forecast wage growth offset an unexpected fall in the United Kingdom’s jobless rate.
Gold fell to an 18-month low as the dollar continued to outshine it for risk-averse traders.
Spot gold was down 0.1 percent at $1,192.11 an ounce at 0110 GMT, after hitting its lowest since late January 2017.
U.S. gold futures were down 0.1 percent at $1,199.1 an ounce.
There was little good news from the industry, with South Africa's Gold Fields announcing it plans to cut costs and 1,100 jobs at its struggling South Deep mine, sending its shares down more than 12 percent.
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(Writing by Shane McGinley; Editing by Michael Fahy)
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