Shares of European bank stocks like BNP Paribas (BNPQY) and BBVA (BBVA) crashed as the Turkish lira plunged against the dollar amid escalating political and trade tensions with the U.S.
X
President Trump on Friday said he had "just authorized a doubling" of steel and aluminum tariffs on Turkey. The U.S. has also announced sanctions on two Turkish officials over the nation's detainment of an American pastor.
Earlier, the Financial Times reported the European Central Bank expressed worries about BNP, BBVA and UniCredit, which have "significant" operations in Turkey, as the lira's drop raises the risk of default on foreign-currency loans.
Turkish President Recep Tayyip Erdogan has been defiant. He called on citizens Friday to convert any gold and foreign currencies they are holding into lira to help prop up its value.
On Thursday, Erdogan dismissed the lira's free fall. "Don't forget, if they have their dollars, we have our people, our God," he said, according to Reuters.
BNP Paribas, based in France, tumbled 5% in the stock market today. BBVA, in Spain, fell 5.4%. UniCredit, in Italy, fell 5.6%. Elsewhere, Deutsche Bank (DB) fell 5.2%.
Turkish Contagion?
The lira's value has dropped more than 30% this year against the dollar, and Turkey's banking system has been struggling against towering inflation. The slide is a result of Erdogan's attempts to exert more authority over the economy and monetary policy.
In particular, his push for lower interest rates to stimulate borrowing and economic growth have sparked concern about how effectively — or independently — the nation's central bank could address the situation as traders flee the currency.
Meanwhile, Erdogan in recent years has moved aggressively to consolidate power, most strikingly with a purge of thousands of government employees following a coup attempt in 2016.
Even as bank stocks fall, some analysts are less concerned about the prospect of Turkey's problems swallowing up part of the global financial system.
"While the situation in Turkey is not good, there is not really a contagion that will dramatically affect global stock markets, and we have seen this before in Greece, and to a lesser extreme, Italy," Tigress analyst Ivan Feinseth said in a note on Friday.
"The end result was the markets sold off on concerns over Greece, which could have had much more impact to the EU and the global economy, stock markets around the world including the U.S. recovered and went significantly higher."
The ECB does not believe the scenario is "critical" yet, the FT said, adding that foreign-currency loans account for roughly 40% of Turkey's banking-sector assets.
Turkish borrowers owe Spanish banks $83.3 billion, the FT said. They owe $38.4 billion to French banks. Banks in Italy, the paper said, were owed $17 billion in local and foreign currency.
Bank Stocks Set Up Bases
As for U.S. bank stocks, JPMorgan Chase (JPM) lost 1.2%. The stock is in a flat base with a 119.43 entry. Citigroup (C), which is more internationally exposed than its U.S. counterparts, fell 2.6%. The stock is consolidating.
Bank of America (BAC) fell 1.5% to 31.12. BofA's stock was below a 31.46 entry of a double-bottom base.
Goldman Sachs (GS) slid 2%, while Morgan Stanley (MS) was off 1.6%.
YOU MIGHT BE INTERESTED IN:
Here's What JPMorgan Says About Recession Risk As Yield Curve Flattens
Goldman Sachs Beats, But Equity Trading Weak; Solomon Named CEO
American Express Plans Review After Report It Secretly Raised Forex Prices
Banks And Financial Stocks: Latest News And Analysis
The post Bank Stocks Fall As Dollar Proves More Almighty Than God In Turkey appeared first on Investor's Business Daily.
http://feedproxy.google.com/~r/BusinessRss/~3/3z-aRkEE7z8/
No comments:
Post a Comment