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Market report: Fresh sanctions threat from US knocks recovery of Turkish lira
Rattled markets ended a rollercoaster week on the back foot after the Turkish lira’s recovery suffered a setback with tensions mounting with the US.
US treasury secretary Steven Mnuchin warned the country will turn up the heat on under-fire president Recep Tayyip Erdogan by imposing more crippling sanctions if Turkey refuses to free American pastor Andrew Brunson. The row is likely to escalate in the coming days after a court in the Turkish city of Izmir decided to reject an appeal for release by Mr Brunson.
The lira started trading brightly, rallying for a fourth consecutive day, before it slipped as much as 7.5pc against the dollar on the new threats. It later clawed back to a 4.8pc loss in whipsaw trading exacerbated by the lira’s low levels of liquidity.
The currency collapsed to record lows on Monday as relations between the two countries soured and fears mounted that government inaction over rampant inflation will spark an economic crisis. The lira recovered 6.3pc this week but is still the world’s worst performing currency versus the dollar in 2018.
The fresh slide dented investor confidence and knocked emerging market currencies back into the red.
The South African rand sank as much as 2.4pc while the Brazilian real flirted with a two-year low after dropping 1.4pc. European markets ended the week in retreat while a late rally on the FTSE 100 nudged it into positive territory. The blue-chip index inched up 2.21 points to 7,558.59.
Elsewhere, City scribblers rounded up on B&Q owner Kingfisher to drag its shares down to a five-year low.
Analysts at HSBC, RBC and UBS all trimmed their price targets for the DIY giant as it struggles to turn around its ailing French businesses. RBC predicted it would take its Castorama division “time to improve”, while UBS warned that “numerous uncertainties”, including Brexit and issues in its Brico Dépôt brand, could offset the benefits of its five-year turnaround plan. After sinking as much as 2.7pc in intraday trade, Kingfisher pared its losses to close 1.2p down at 273.3p.
Global Ports Holding was the sole highlight on a threadbare corporate calendar with the ports operator soothing fears over the impact of the lira crisis.
Its main container port is outside the city of Antalya in southern Turkey but it insisted that the lira’s movements are largely inconsequential to its results. It generates the majority of its revenues in the country in euros. Global Ports reported a 14pc surge in revenues to $57m (£45m) at the interim stage and now expects its full-year figures to be at the upper end of expectations, boosting shares 20p to 510p.
Copper miner Kaz Minerals slumped a further 81.7p to 478.5p, a fresh one-year low, after Credit Suisse blasted its decision to snap up a $900m mine in the far east of Russia. In a downgrade to “neutral”, it warned that the company’s outlook had been “turned on its head” by the acquisition.
Flooring firm Airea jumped 5.5p to 60p after its performance improved following the closure of its carpets business.