A plunge in the Turkish lira rocked global equities and emerging markets on Friday and fear of further fallout sent investors scurrying for safety in assets like the yen and US government bonds.
European shares and a gauge of global equity markets closed down more than 1 per cent, while Wall Street also fell, though not as much. Germany’s DAX index slid 2 per cent.
The lira fell as much as 18 per cent against the dollar in its worst day since Turkey’s financial crisis of 2001.
The lira has fallen more than 40 per cent this year, fanning worries about a full-blown economic crisis, reports Reuters.
Bank shares across Europe fell and the euro slipped to its lowest since July 2017.
Shares in France’s BNP Paribas, Italy’s UniCredit and Spain’s BBVA, the banks seen as most exposed to Turkey, fell 3 per cent or more.
An index of regional banking shares closed down 3.2 per cent while the pan-European STOXX 600 index fell 1.07 per cent.
The MSCI All-Country World index, which tracks shares in 47 countries, was down 1.22 per cent and erased all its gains for the week.
Wall Street also fell. The Dow Jones Industrial Average fell 196.09 points, or 0.77 per cent, to 25,313.14. The S&P 500 lost 20.3 points, or 0.71 per cent, to 2,833.28 and the Nasdaq Composite dropped 52.67 points, or 0.67 per cent, to 7,839.11.
The safe-haven Japanese yen hit a one-month high of 113.38 against the dollar, and was last traded at 110.91.
The dollar index, which measures the greenback’s strength against a group of six major currencies, breached 96, taking it to its highest level since July 2017. It was last up 0.84 per cent at 96.309.
Emerging market stocks lost 1.66 per cent, while the Mexican peso, a proxy for emerging market currencies, shed 1.29 per cent to the dollar.
Oil prices rose more than 1 per cent as US sanctions against Iran looked set to tighten supply, but futures remained lower for the week as investors worried that global trade disputes could slow economic growth and hurt demand for energy.
Benchmark Brent crude oil rose 74 cents to settle at $72.81 a barrel. US light crude settled 82 cents higher at $67.33 a barrel.
US gold futures for December delivery settled down 90 cents, or 0.1 per cent, at $1,219 per ounce.