Global Markets: Shares regain footing as lira roars out of rout

World share markets regained their footing on Tuesday as the threat from the collapse of the Turkish lira ebbed and reassuring German data offset signs of slowing growth in China.

After three weeks of losses, Turkey`s lira finally recovered as the country`s central bank moved to ease pressure on the currency, triggering a 7 percent surge to 6.4 per dollar. It still lost almost 10 percent on Monday alone and has shed more than two-fifths of its value so far in 2018. The rot also stopped for the South African rand, the Russian ruble and the Argentine peso. Argentina`s central bank unexpectedly raised interest rates by 5 percentage points on Monday. Even so, the peso hit a record low.

"These things get very volatile in both directions once you have had a really big move," Saxo bank`s head of FX strategy John Hardy said. "To suggest this thing is over, you would have to see that Turkey is isolated. I`m not there yet and I don`t think the market is there." European shares also bounced back after two days of selling as anxieties over contagion from the Turkish currency crisis eased.

After falling to a 21-month low on Monday, euro zone bank stocks rose 0.8 percent versus a 0.4 percent gain by the pan-European STOXX 600 cross-sector benchmark.

Data showed the region`s largest economy, Germany, picked up more steam than expected in Q2, although the bounce might have been stronger had surveys from China not proved softer than expected.

Chinese retail sales, industrial output and urban investment all grew by less than forecast in July, a trifecta of disappointment that underlined the need for more policy stimulus in China even as trade risks intensify. The Shanghai blue-chip index was off 0.9 percent and weighing on MSCI`s broadest index of Asia-Pacific shares outside Japan, which eased 0.25 percent.

Moves elsewhere were mixed. Japan`s Nikkei rose 2.3 percent and Australian stocks added 0.8 percent.

BACK TO THE FUTURES

EMini futures for the S&P 500 were still a fraction higher. Ten-year Treasury yields held at 2.88 percent. Investors were encouraged that U.S. declines were only minor overnight after the losses by the lira and other emerging-market currencies. The Dow ended Monday down 0.5 percent, the S&P 500 lost 0.4 percent and the Nasdaq fell 0.25 percent.

"The more significant emerging-market concern relates to the risk that regional underperformance becomes a source of disruption through swings in capital flows and currencies," said Matt Sherwood, head of investment strategy at Perpetual. "While the focus at present is on Turkey, where currency depreciation and rising rates has translated into a marked tightening of financial conditions, it could spread to Mexico, Brazil and India."

Sherwood cited the NAFTA negotiations as a key risk for Mexico and upcoming elections in Brazil and India as potential threats for those two markets.

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GOLD LOSES ITS LUSTRE

Bond yields in Spain and Italy fell, although the euro was still struggling at $1.1407, having touched its lowest since July 2017 on Monday.

It also reached one-year lows against the yen and Swiss franc, safe harbours in times of stress. The dollar was a touch firmer at 110.95 yen, having hit a six-week trough around 110.10 on Monday. Against a basket of currencies, the U.S. currency rose to 96.289 in European trading. In commodity markets, gold slid to its lowest since late January 2017. It was at $1,1195 an ounce.

U.S. government data last week showed that gold speculators had lifted their bearish bets to a record. Holdings of the largest gold-backed exchange-traded fund, New York`s SPDR Gold Trust GLD, have dropped about 10 percent from their April peak and are at their lowest since February 2016.

Oil prices rose after a report from OPEC confirmed that top exporter Saudi Arabia had cut production to avert looming oversupply. Brent gained 60 cents to $73.22 a barrel. U.S. crude added 64 cents to $67.85.