- Turkish lira recovered some of Friday's losses
- Turkish equities market closed down 7%, biggest one-day drop in years
- Selloff in Turkish bonds less drastic
- Rating agencies are looking at potential downgrades of Turkey's debt to junk
- Venezuela's situation deteriorates further as inflation spirals out of control
- ECB's corporate bond purchases are moving along
- Most economists expect no policy change from this week's ECB meeting
By Walter Kurtz*
Once again we begin with emerging markets as we observe the reaction to the failed military coup in Turkey.
The Turkish lira partially recovered Friday's losses (chart shows US dollar giving up Friday's gains against the lira).
The Turkish stock market closed down 7%, the largest one-day decline in years. The market did find a bid at the end of the trading day, however.
In dollar terms, the losses were considerably worse, although USD investors are still up on the year.
While Turkish bonds took a sizeable intraday hit, on a relative basis, the selloff wasn't drastic.
Deutsche Bank points out that up until this point, the overall Turkey fundamentals have been improving. Now, however, the rating agencies are looking at potential downgrades of sovereign debt to junk levels.
The summary below was the forecast for Turkey's central bank action prior to the coup. Will the cut be deeper now?
Source: Goldman Sachs
Aggressive monetary easing will likely weaken the lira further, raising inflation risks.
Source: Credit Suisse, @joshdigga
The South African rand, other EM currencies recovered most of the Turkey-related losses.
The chart shows the US dollar giving up Friday's gains against the rand
As an aside, the S&P500 futures fully recovered Friday's dip... and then some.
Brazil's government bond yield declined further as foreign fixed-income investors move in.
Wage growth in Poland accelerates. As a result, the nation's deflationary pressures should be easing.
Speaking of Poland, here is one reason for the nation's vulnerability to Brexit - remittances from the UK.
Source: @lucy_meakin, @michaelwinfrey
Turning to China, the Tier-1 cities housing prices seem to be peaking.
According to Tom Orik (Bloomberg), "China GDP sector breakdown shows the bricklayers [construction] saved growth from the stockbrokers [financial services], again."
China's government spending continues to rise in order to cushion the slowdown in the private sector activity.
The situation in Venezuela continues to deteriorate as inflation spirals out of control.
Source: @IanTalley, WSJ
Source: @IanTalley, WSJ
The latest inflation report from New Zealand surprised to the downside, strengthening the case for another near-term interest rate cut.
Source: Tradingeconomics.com, Statistics New Zealand
The kiwi dollar took a hit as a result.
The yen continues to weaken, now giving up most of the Brexit-related gains. Bets are being placed on increased stimulus.
Turning to the Eurozone:
The European Central Bank's corporate bond purchases are moving along. The ECB just released the names of the corporate bonds it bought. As expected there are quite a few non-bank financials.
Source: ECB, Zero Hedge
Most economists expect no change in policy from this week's ECB governing council meeting.
Source: @business, @acemaxx
Economists reduced their 2017 Eurozone growth forecasts after Brexit.
Turning to Food for Thought:
According to the Fed, US "public transit use was down almost 4 percent in April from a year earlier". Cheap gasoline?
Source: Federal Reserve Economic Data
How would Americans react to a presidential candidate who is an atheist?
Source: Pew Research, h/t Yana
— Edited by John Acher
* Walter Kurtz is a pseudonym
** This is an abridged version of the Daily Shot. To subscribe to the full version, link to the Daily Shot and select the appropriate command. E-mail addresses are never shared with anyone.is head of commodity strategy at Saxo Bank