Record low for Turkish Lira as earthquakes strikes

Turkey's Lira and Turkey ETF plummets after deadly earthquakes.

February 6, 2023
Record low for Turkish Lira as earthquakes strikes
Matt Crabtree

Written By

Matt Crabtree

 
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After an earthquake that has killed at least 2,200 people rocked Turkey, the currency plummeted and stock markets crashed. Turkey's economy was already reeling from soaring inflation higher than the UK rate. 

The lira plunged to 22.70 pound sterling and 18.85 US dollars, while the key stocks benchmark of the nation fell as much as 4.6%, with banks falling more than 5% before recovering part of their losses.

The massive magnitude 7.8 earthquake that hit central Turkey and northwest Syria this morning was followed by another major earthquake this afternoon.

In Touch Capital Markets senior FX analyst Piotr Matys said the earthquake had caused “added uncertainty ahead of key elections” in May.

This morning, Borsa Istanbul announced a temporary suspension of transactions in shares of many firms in the earthquake zone, and throughout the day, it has added additional names to the list.

In the aftermath of positive US employment data on Friday, the dollar rallied sharply, hurting currencies and equities across emerging countries.

Turkey ETF plummets as 2,500+ dead from powerful quake strikes in south Turkey and Syria

A massive earthquake struck Turkey and Syria, killing at least 1,500 people and leaving a trail of damage and ruin on both sides of the border.

The earthquake that struck Turkey on Sunday, injuring thousands more, sent the lira to an all-time low and the stock market plunging on Monday, adding to the economic hardship already being felt in a region already struggling with economic uncertainty and hegemonic turmoil. Reuters claims that there have been another 700 fatalities in Syria.

A natural gas pipeline was also damaged. 

The Turkey ISE National 100 XU100, -1.35%, which follows the output of 100 firms curated by the National Market, REITS, and VC investment trusts living on the Istanbul Stock Exchange, fell 1.4% on Monday, the same day the Turkish lira USDTRY, 0.04% hit a record low of 18.83 against a strong dollar.

Many Turkish stocks fell by 1.9%, as measured by the iShares MSCI Turkey ETF (TUR, -2.09%).

At approximately 4 a.m. on Monday, locals were jolted awake by one of the largest earthquakes to strike the area in a century, with tremors felt as far away as Lebanon and Israel.

The Vice President of Turkey, Fuat Oktay, has said that 1,541 people have been killed and many thousand more wounded.

There have been at least 968 fatalities in neighbouring Syria. State-run Syrian news agency SANA reports 538 deaths throughout government-held territory, with the majority occurring in the cities of Aleppo, Latakia, Hama, and Tartus.

The “White Helmets”, also known as the Syria Civil Defense, have claimed that 430 people have died in regions now under rebel control. During the deadly civil war that broke out in 2011, anti-government rebels took control of most of NW Syria, bordering Turkey.

According to the USGS, the 7.8-magnitude earthquake occurred at a depth of 24.1 kilometres (14.9 miles) at a distance of 23 kilometres (14.2 miles) in Turkey's Gaziantep province.

Repeated aftershocks have been felt all day. Nine hours after the first tremor, Turkey was struck by the biggest, a 7.5 magnitude earthquake, according to the USGS. That tremor occurred around 59 miles (95 kilometres) to the north of the first quake.

Pictures from the scene in Turkey showed people huddling together against the cold as day broke over rows of toppled houses, some of which had left residents' homes open to the elements.

Comes amid EU tensions; UK public anticipate another rate hike 

After Thursday's half-point hike by the Bank of England, public sentiment is already becoming pliable for another turn of the screw. 

Catherine L. Mann, a member of the Monetary Policy Committee (MPC), warned this morning in Budapest that the next decision on rates “is still more probable” to be a raise rather than a reduction or even a pause.

Pent-up demand will be difficult to manage until prices reflect the impact of the Chinese leadership's massive U-turn on opening up the world's second-largest economy and rapidly lowering energy costs in Europe. 

On Friday, the United States reported employment numbers that were so impressive, they contributed to the impression of a runaway train gaining speed without stopping.

This week, the GDP number for December will be released, revealing whether or not the United Kingdom avoided recession in the second half of 2018. The performance in November was far better than predicted, and I anticipate that December will again exceed expectations. 

There is little indication that labour shortages are lessening, and maintaining the status quo on public sector wages will be an exhausting uphill battle for the government. 

Everything points to inflation being higher for a longer period of time than is generally expected at the moment. Rates may reach a maximum of 4.5 per cent, as was predicted by Andrew Bailey last month. 

In contrast, I anticipate hearing much more about the recession and much more about the big bounce and all the extra economic troubles it brings when winter gives way to spring and summer.

How can a natural disaster affect the stock market?

Fisher Investments found that natural catastrophes don't often generate economic or market catastrophe, and that rehabilitation doesn't act as economic stimulation. There is also little data suggesting natural disasters reduce stock market returns unless conditions are already fragile.

What stocks do well in a recession UK?

Regardless of the condition of the economy, consumer staples including food, drink, and personal care items, as well as financial services and utilities, are examples of defensive industries that often do better when demand drops.

What stocks get hit hardest in a recession?

Retail, food service, tourism, travel, leisure and hospitality, service providers, real estate, manufacturing, and warehousing are among the most hit industries.

Does gold's value increase during recessions?

Gold doesn't lose its worth as paper money does. The rarity and preciousness of the metal contribute to the currency's continuing allure. One who acquired gold during a recession would have cut their losses, if not come out ahead, by the time it ended. Gold's price is significantly impacted by whether real interest rates are positive or negative.

Takeaway

The earthquake produced two distinct explosions along a natural gas pipeline in Hatay province.

Reuters reported that the state-run pipeline operator Botas has temporarily halted natural gas supplies via the line serving the provinces of Gasiantep, Hatay, and Kahramanmaras, as well as other districts.

According to a Botas official, operations at the Ceyhan oil port in southern Turkey have been halted and an emergency conference is being conducted to discuss the issue. The Ceyhan terminal sits 155k

According to Yunus Sezer, the chairman of Turkey's Disaster and Emergency Management Agency, at least 1,498 people were killed and 8,533 others were wounded when a magnitude 7.8 earthquake slammed central Turkey and northwest Syria early Monday morning, followed by another strong quake in the afternoon.

A Monday report from the U.S. Geological Survey predicted that the first earthquake might cause economic damages of more than £700 million.

On Monday, the ICE U.S. Dollar Index DXY, 0.78%, which tracks the greenback against a group of six major currencies, rose 0.7%.

As of Monday morning, crude oil futures were trading lower despite rumours that Turkey has blocked crude-oil supplies to its export facility in Ceyhan. According to Reuters, the Turkish pipeline operator BOTAS confirmed that the major pipelines transporting crude oil from Iraq and Azerbaijan to Turkey were not damaged.

On Monday, the natural resources ministry of Iraq's semi-autonomous Kurdistan Region said that supplies had been halted along the pipeline connecting the northern Kirkuk oilfield of Iraq with the Turkish city of Ceyhan.

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