Sunday Outlook: Turkish lira drops again on Friday, U.S.-China trade talks limit global market losses

Another steep drop in the Turkish lira kept weighing on stock markets on Friday, while easing trade tensions between the United States and China limited losses in global stocks. Oil prices retreated on worries over lower demand. More commentary on Middle East markets, currencies and precious metals.

  
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 24, 2018.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 24, 2018.

REUTERS/Brendan McDermid
  • Global markets weighed down by a drop in Turkish lira, but easing trade tensions boost stocks to close mostly higher
  • Middle East stocks track emerging markets, trade in narrow ranges ahead of Eid al-Adha holiday
  • Oil prices add gains on Friday, close lower for the week on worries over slower demand
  • The dollar drops, gold prices trade higher

Global markets

Turkey’s lira dropped 3 percent on Friday and has so far lost nearly 40 percent of its value against the dollar this year, after a Turkish court rejected an American pastor’s appeal for release, weighing on global markets.

The Wall Street Journal reported on Friday afternoon that Chinese and United States negotiators are drawing up a road map for their trade talks next week, which could ease trade tensions between the two countries, providing a boost to global markets.

A Chinese delegation led by vice-minister of commerce, Wang Shouwen will meet U.S. representatives, China’s Ministry of Commerce said on Thursday.

“There is still a great deal of difference between agreeing to talk and coming to an agreement,” CMC Markets analyst Michael Hewson told Reuters.

“For now it appears an escalation has become less likely, hence (Thursday’s) rebound in equity markets,” he added, referring to an overnight rally on Wall Street.

The Dow Jones Industrial Average rose 110.59 points, or 0.43 percent on Friday, to 25,669.32, the S&P 500 gained 9.44 points, or 0.33 percent, to 2,850.13 and the Nasdaq Composite added 9.81 points, or 0.13 percent, to 7,816.33.

The pan-European FTSEurofirst 300 index lost 0.09 percent.

MSCI’s All-Country World index, which follows shares in 47 countries, rose 0.3 percent, notching its first weekly gain in two weeks.

Middle East markets

Stock markets in the Middle East lacked momentum on Thursday’s session, ahead of a long holiday this week when markets will mostly be closed for the Muslim festival of Eid al-Adha. Markets in the Middle East mostly tracked a drop in emerging markets.

Saudi Arabia’s index ended the session flat. Saudi Basic Industries Corp (SABIC) was down 0.7 percent. Saudi Arabian Mining Company (Ma'aden) declined 2.5 percent.

Samba Financial Group and Banque Saudi Fransi declined 0.7 percent and 0.2 percent respectively.

Dubai’s index dropped 0.5 percent. Dubai Islamic Bank declined 1.2 percent and Emirates NBD, Dubai's biggest lender, was down one percent amid continued concerns among investors about its deal announced in May to buy Turkey’s Denizbank for $3.2 billion.

Abu Dhabi's index rose 0.4 percent. Abu Dhabi National Energy Company, also known as Taqa, gained 6.2 percent.

Qatar’s index was down 1.5 percent on Thursday, with Qatar Islamic Bank witnessing the biggest decline, at 4.6 percent.

Egypt’s index dropped 0.3 percent, Bahrain’s index added 0.3 percent, while Kuwait’s index added 0.2 percent and Oman’s index was flat at 4,390 points.

Oil prices

Oil prices added gains on Friday but closed lower for the week due to fears that trade disputes and slowing global economic growth would lower demand for oil.

Brent crude oil futures LCOc1 settled up 40 cents, or 0.6 percent, at $71.83 a barrel, after touching a high of $72.49 earlier in the session.

U.S. West Texas Intermediate crude futures (WTI) rose 45 cents, or 0.7 percent, to $65.91, after touching a session high of $66.39.

For the week, Brent was down 1.4 percent, and U.S. crude fell 2.6 percent.

“One of the biggest concerns out there is that China’s demand numbers are coming down if China’s GDP growth is slowing,” Tariq Zahir, managing member at Tyche Capital in New York, told Reuters.

Currencies

The dollar dropped on Friday 0.56 percent against a basket of six major currencies on easing trade tensions between the U.S. and China.

“You had the dollar bought aggressively over the past few months when investors were risk-averse and were seeking safety in the greenback,” Kathy Lien, managing director of FX strategy at BK Asset Management in New York, told Reuters.

“Investors are covering shorts into the last two weeks of summer and unwinding positions,” she said.

Precious metals

Gold prices were trading higher on Friday on a weaker dollar.

Spot gold added 0.31 percent to $1,177.21 ounce by 1735 GMT, but was down 2.7 percent this week in its sixth consecutive weekly loss.

 

Gain a deeper understanding of financial markets through Thomson Reuters Eikon.

(Writing by Gerard Aoun; Editing by Michael Fahy)
(gerard.aoun@thomsonreuters.com)

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