Having panced briefly on Friday night on news of a Turkish coup, which has since not only failed but been cast away as speculation rises that it was staged and designed to give Erdogan even more authoritarian power, markets have moved on and are now focusing on the main overnight event which was the surprising $32 billion bid by Japan’s SoftBank (SFTBY) for U.K.’s semiconductor giant ARM Holdings Plc (ARMH) which has soared 45%, crushing the recently rising short base, sending comparable semis higher in European trading and pushing the Stoxx Europe 600 Index up by 0.6%, after surging 3.2% last week. Safe haven assets, including the yen, gold and U.S. Treasuries fell as geopolitical concerns faded away.
That said, there are still some aftershocks in Turkey as markets digest the fallout from the failed coup and the inevitable concentration of even more power in Erdogan’s hands who has unleashed a historic purge to eliminate his key enemies.
Turkish officials over the weekend sought to limit the impact on financial markets by promising unlimited liquidity to lenders and measures to support the currency. Turkey’s lira recovered more than half of its loss from Friday, while the Borsa Istanbul 100 Index sank 2.7% after a 6.2% jump last week that marked its best performance since October. Turkish Airlines tumbled as much as 6.5% . President Recep Tayyip Erdogan ordered reprisals after the attempted takeover by the military led to the deaths of more than 190 civilians and so far more than 6,000 people, including members of the judiciary, have been detained.
The failed putsch in Turkey came less than a week after global equities had recovered from the selloff that followed the U.K.’s June 23 vote to leave the European Union, an event that wiped almost $4 trillion off the value of the securities over two trading days, and which has since seen US stocks surge to all time highs.As Bloomberg notes, Hermes Asset Management is among investors seeing potential for a relief rally in Turkish assets even amid longer-term concern about the country’s political and economic situation. Rabobank and CrossBorder are predicting outflows from Turkey. Turkey’s deputy prime minister posted on Twitter that there’s “no need to worry.â€
“Geopolitical risk has reared its head again,†said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which manages more than $110 billion. “But it’s at least the fourth coup in Turkey since 1960 and I suspect no lasting impact on global markets.â€
Elsewhere, the MSCI Asia Pacific excluding Japan Index rose 0.4%, after surging 4.5 percent last week. Benchmarks gained in Australia, Hong Kong and India, while the Shanghai Composite Index declined after data showed new home-price gains moderated last month in China. Markets were shut in Japan and Thailand for holidays. Malaysia Airports Holdings Bhd., owner of Istanbul’s second-biggest airport, tumbled more than 5 percent on concern fewer people will visit Turkey following the attempted coup. Lenovo Group Ltd., the world’s biggest personal-computer maker, rallied to a two-month high in Hong Kong after a filing last week showed its chief executive boosted his stake. Futures on the S&P 500 index (SPY) rose 0.5 percent ahead of earnings from companies including Bank of America Corp. (BAC), Charles Schwab Corp. (SCHW) and International Business Machines Corp. (IBM)
Turkey’s 10-year bonds tumbled 2.5 percent, pushing their yield up by 41 basis points to this month’s high of 9.30 percent. The rate on German notes due in a decade declined by two basis points to minus 0.01 percent. The yield on similar-maturity U.S. Treasuries rose three basis points to 1.58 percent. “There seems to be a reasonable resolution to the events†in Turkey, said Bill Bovingdon, the chief investment officer at Altius Asset Management in Sydney.
Market Snapshot
- S&P 500 futures up 0.1% to 2156
- Stoxx 600 up 0.1% to 338
- FTSE 100 up 0.% to 6697
- DAX unch at 10059
- German 10Yr yield up less than 1bp to -0.03%
- Italian 10Yr yield down less than 1bp to 1.21%
- Spanish 10Yr yield down less than 1bp to 1.16%
- S&P GSCI Index down 0.5% to 360.3
- MSCI Asia Pacific up 0.4% to 134
- Nikkei 225 closed
- Hang Seng up 0.6% to 21688
- Shanghai Composite up less than 0.1% to 3054
- S&P/ASX 200 up 0.3% to 5430
- US 10-yr yield down less than 1bp to 1.54%
- Dollar Index down 0.03% to 96.05
- WTI Crude futures down 1.1% to $45.18
- Brent Futures down 1.2% to $46.79
- Gold spot down 0.2% to $1,332
- Silver spot down 0.4% to $20.23
Global Headline News
- SoftBank to Buy Britain’s ARM for $32b in Record Deal: SoftBank to secure leader in global mobile computing with offer that has 43% premium to Friday close
- Turkey Moves to Calm Investors After Coup Attempt Quashed: Central bank pledges unlimited liquidity to commercial lenders
- NextEra’s $2.6b Hawaii Deal in Doubt as Regulator Says No: State Public Utilities Commission votes 2-0 against purchase
- Clinton Maintains Lead of 46% to 41% Over Trump: WSJ/NBC Poll
- Trump Formally Introduces Mike Pence as VP Nominee
- Privacy Suit Against Apple, App-Makers Proceeds as Class Action
- ‘Secret Life of Pets’ Fends Off ‘Ghostbusters’ to Stay No. 1
- Three Police Officers Killed, Three Wounded in Baton Rouge: NYT
