Markets rebound as Turkey hikes rates amid emerging markets turmoil
Istanbul aggressively increased its overnight lending rate to 12% from 7.75%
Wednesday 29 January 2014
The latest bold tactics to stem a growing crisis in emerging markets reassured the City today after a dramatic interest rate hike by Turkey’s central bank to defend its currency.
London’s FTSE 100 — down more than 4 per cent in the last week as a succession of blows to emerging economies dented sentiment — recovered its poise, adding 38.72 points to 6611.05.
The gains came after Turkey’s central bank aggressively increased its overnight lending rate to 12 per cent from 7.75 per cent to keep a grip on inflation and stabilise the Turkish lira.
Turkey — gripped by a corruption scandal engulfing the government — is labouring under a big deficit and its currency is the latest to be rocked by the flow of “hot money” out of emerging markets as the US Federal Reserve slows the pace of its money-printing programme.
The nerves began last week when disappointing Chinese manufacturing figures and a run on the Argentinian peso put emerging market currencies under the spotlight.
India responded this week with a surprise rise in interest rates, while Brazil’s central bank has also tightened policy for six meetings in a row and South Africa is now under pressure to raise borrowing costs.
Brazil’s central bank governor Alexandre Tombini warned at Davos of the “vacuum cleaner” of rising interest rates in the developed world, sucking money out of emerging markets.
Deutsche Bank analyst Jim Reid said: “The question remains whether the actions are sufficient enough to stabilize sentiment which has deteriorated sharply in recent weeks.”
Turkey’s actions bolstered the lira by almost 2 per cent and filtered through to global equity markets, lifting Germany’s Dax and France’s CAC 40 by more than 1 per cent following gains in Asia.
Japan’s Nikkei jumped 2.7 per cent and Hong Kong’s Hang Seng added 0.8%. CMC Markets analyst Michael Hewson said: “These measures, it would seem, are calming concerns about a run on emerging market currencies.
“But it also raises serious concerns that the internal shock of these rate hikes will curtail any growth there is in the short term, and in turn hurt profitability of any companies who do business in these markets.”
- 3 The enemy within: People who hear voices in their heads are being encouraged to talk back
- 4 Phil Neville backtracks on Tomas Rosicky 'I'd smash him' comments from Match of the Day 2
- 5 SAG Awards: Fake applause track interrupts Reese Witherspoon
Rowan Atkinson to sell £10 million McLaren 'supercar' he crashed into a tree and a lamppost
Paris attacks: Do not call Charlie Hebdo killers 'terrorists', BBC says
Asteroid narrowly scrapes past Earth: how to watch the closest space rock for decades as it flies by
UK weather: Snow to fall in the coming week with sub-zero temperatures to last until early February
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Nigel Farage: NHS might have to be replaced by private health insurance
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
Greece elections: Syriza and EU on collision course after election win for left-wing party
George Galloway condemns 'racist, Islamophobic, hypocritical rag' Charlie Hebdo at freedom of speech rally
British Muslim school children suffering a backlash of abuse following Paris attacks
iJobs Money & Business
£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...
£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...
£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...