Summary
Turkey's markets recovered on Friday following steep declines driven by political news and pressure on the currency. Equities, sovereign debt traded internationally and banking sector shares all posted gains as trading resumed after heavy selling the previous session.
Market moves
The BIST 100 index in Istanbul rose more than 2.5% on Friday, reversing part of a 6% drop recorded on Thursday that had forced a temporary suspension of trading. That earlier rout followed a top court decision that effectively removed the main opposition leader Ozgur Ozel from his position, a development that had been associated with the sharp selloff.
Turkish government bonds that trade in international markets also recovered on Friday after suffering their steepest one-day fall since March during Thursday's turbulence. Banking shares, which had plunged nearly 9% in the prior session - their largest single-day fall in over a year - gained 1.2% on Friday.
Currency and risk indicators
The Turkish lira remained at a new record low, trading at 45.74 per dollar. The currency has fallen almost 6% so far this year under a managed depreciation policy. In parallel, the cost of insuring Turkish sovereign debt via credit default swaps rose to a six-week high after Thursday's market disruption.
Context and implications
Friday's recovery saw multiple market segments retrace some of Thursday's losses: the main equity benchmark, international sovereign bond prices and banking stocks all registered gains. However, the currency's record low level and the rise in credit default swap costs indicate that market stress persisted, even as risk assets regained footing during the session.
Data points cited in this report
- BIST 100: rose more than 2.5% on Friday after a 6% drop on Thursday that led to a trading suspension.
- Banking stocks: gained 1.2% on Friday after falling nearly 9% the previous session.
- Turkish lira: hit a record low of 45.74 per dollar and has declined nearly 6% this year under a managed depreciation policy.
- Credit default swaps: cost of insuring Turkish debt climbed to a six-week high following Thursday's market turbulence.
- Turkish government bonds traded internationally: recovered after their steepest decline since March on Thursday.
Reporting in this piece is confined to the market moves and indicators explicitly referenced above.