Markets rattled as Turkish lira dives

LONDON - Turkey's troubled lira tumbled Monday to fresh record lows against the euro and dollar, piling pressure on stock markets on fears the country's crisis could spill over into the world economy.

Having already sparked a sell-off on European and New York stock markets late last week, the lira crisis did more damage to most equities exchanges in Europe, although Wall Street was slightly firmer in early trading.

The US dollar, the yen and the Swiss franc were scared investors' preferred safe havens. The lira dived further overnight to record lows of 7.24 to the dollar and 8.12 versus the euro.

The unit recovered somewhat after Turkey's central bank announced a raft of measures aimed at calming markets.

"Investors remained fearful on Monday (over) the Turkish lira's precipitous plunge -- and the concerns that a financial crisis in the country would ripple through the rest of Europe," said Spreadex analyst Connor Campbell.

Worries were focused on the possible impact on some European banks, including Spain's BBVA, Italy's UniCredit and France's BNP Paribas.

"So far the impact of the lira crash has been limited in Europe and the rest of the world," said Agathe Demarais, Turkey analyst at The Economist Intelligence Unit, in comments emailed to AFP.

"However, within a few months western banks that have strong ties with Turkey will feel the impact of the crisis as Turkish corporates will struggle to repay debt in foreign currency.

"The sharp depreciation of the lira has almost doubled the local currency value of external debt repayments since the start of the year," Demarais added.

The lira tumbled some 16 percent against the dollar on Friday, as US President Donald Trump said he had doubled tariffs on steel and aluminium from Turkey.

The crisis has been sparked by a series of issues including a faltering economy -- the central bank has defied market calls for rate hikes -- and tensions with the United States, which has hit Turkey with sanctions over its detention of an American pastor. Investors are now fretting over potential economic contagion.

In its first statement since what was dubbed "Black Friday" in Turkey, the nation's central bank said Monday that it was ready to take "all necessary measures" to ensure financial stability, promising to provide banks with "all the liquidity" they need.

The bank also revised reserve requirement ratios for banks, in a move also aimed at staving off any liquidity issues. But to the dismay of markets, the statement gave no clear promise of rate hikes, which is what most economists say is needed. In Frankfurt on Monday, investors fled shares in German chemicals and pharmaceuticals giant Bayer, fearing a massive damages ruling against one of newly-acquired US firm Monsanto's flagship products could signal a wave of costly lawsuits.

A California jury on Friday awarded dying groundskeeper Dewayne Johnson damages of almost $290 million, saying Monsanto should have warned buyers that its flagship Roundup weedkiller could cause cancer. While observers have predicted thousands of other suits could follow, Bayer said the jury's findings went against scientific evidence and that other courts might "arrive at different conclusions".

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