Global markets start this week on a nervous footing following weekend news that the Turkish government has sacked the governor of its central bank. Both the Japanese yen and the US solar are higher as \forex traders favour safer havens. Shares across the region are also likely to come under pressure today after US stocks finished last week on a negative note.
The move by Turkish president Erdogan shocked markets and could see recent rallies in Turkish asset prices reverse sharply. The sacking follows a 2% lift in interest rates last Thursday, and analysts now fear a return to ultra-low rates and a potential inflationary spiral. The lira gave up 5 months of gains, and is now trading near all-time lows.
Industrial commodities and cryptocurrencies are two brighter spots on traders’ radar. Crude and most base metals rose on Friday night, and the gains could provide support for regional markets that are skewed towards resource stocks. Regardless, futures indicate opening losses for Asia Pacific shares today, after heavy selling of China exposed markets late last week.
After a heavy week of data and central bank decisions last week the market calendar is clearer this week. European inflation and US PMIs will hit headlines, but market reactions will be muted unless there are large surprises. Support for bond markets in early Monday trading may ease some investor concerns about rising interest rates.