Turkey Markets Roil as Idlib Conflict Escalates


US stocks started the week on a high with stocks notching records as investors focused on solid Q4 earnings. Restaurants Brands International, parent company of Burger King and Popeyes, closed 2.7% higher as Q4 earnings topped expectations on the back the popular Popeyes chicken sandwich. The NASDAQ and the S&P inked fresh records on the day closing 1.13% and 0.73% higher respectively while the DOW rose 0.60%. Treasury yields closed slightly lower with 2Y and 10Y USTs closing at 1.3931% and 1.5696% respectively.


The EU is putting up negotiating demands ahead of the start of the negotiations of a trade deal with the UK in March. The EU aims to have the UK abide by EU standards on unfair competition, fishing human rights, and more controversially, state aid. Prime Minister Boris Johnson has however dismissed some of the demands insisting he wants to break from the EU’s laws as much as possible after Brexit. The EU’s chief Brexit negotiator Michel Barnier is also digging in, saying the EU will not conclude a deal “at any price.” The pound closed higher at $1.2915 while yield on 10Y and 30Y UKTs closed lower at 0.557% and 1.066% respectively.


Italian industrial production for December slid 4.3% YoY in December according to the latest data release by the Italian Statistics Institute. The figure marked deterioration from November’s revised 0.8% decline marking a 10th straight month of deterioration. Following the slight 0.1% pickup in November, monthly production in December also took a hit, sliding 2.7%. The euro closed weaker at $1.0911 while yield on 10Y and 30Y BTPs closed slightly higher however at 0.952% and 1.992% respectively.


Asian stocks were higher on Tuesday as markets pushed away coronavirus fears to focus on an expected new round of stimulus by the PBOC. Remarks by an advisor to the Chinese central bank calling for a lowering of benchmark deposit rates reinforced expectations of yet more stimulus following an equivalent $243 million injected by the central bank last week. The HANG SENG led gains, up 1.26% on the day while the ASX and the CSI closed 0.61% and 0.39% higher. The NIKKEI was closed for Japanese holiday.


Turkish markets were lower on Monday as the Turkey-Syria feud escalated with reports emerging that five Turkish troops had been killed. The latest escalation follows President Erdogan’s threats last week over continued assault of Turkish outposts in the north-western Syrian province of Idlib. Turkey retaliated with an attack on 155 targets with Syrian military equipment including tanks, artillery units and a helicopter struck according to a statement by the Turkish Defence Ministry. The Borsa Istanbul 100 shed 2.2%, the biggest drop since October while yield on TURKEY 30s rose 21bps. The lira remained steady however closing slightly firmer at 6.0114 to the dollar following interventions by the central bank over the weekend making bets against the currency difficult.


The latest Brazil central bank survey saw economists cutting their end-2020 inflation forecast to 3.25% from a previous 3.4%, further away from the 4% target. This followed the latest figures that showed inflation easing more than expected in January on a monthly basis with food prices notably slowing more than previously. The weakening of the real – the second worst among EM currencies so far this year – remains the most probable factor that could spur inflation with the central bank having signalled that it will pause further cuts. The real closed weaker at 4.3255 to the dollar while BRAZIL 50s were higher, trading in the mid 104s.


Proposals to raise minimum capital requirements for banks by the Central Bank of Nigeria may prove more difficult for lenders to achieve in 2020. Outlook for Nigerian banks is not as positive with economy being weak and tighter regulations with the upping of minimum loan-to-deposit ratios; banks may as such be forced into consolidations if the CBN pushes through with the proposals. The Nigeria Bank Sector index continued its slide on Monday, closing 0.54% lower. The naira was slightly weaker at 361.63 to the dollar while NGERIA 49s were lower, trading in the low 113s.