By Joyce Yu
Philadelphia, PA–Global stocks slumped on Wednesday for concerns over Turkey’s financial crisis. Tech shares and banks suffered the most loss with the Dow dropping as much as 300 points and Nasdaq Composite pulling back 1.7%.
Bank of America and Citigroup both fell more than 1.5% while J.P. Morgan Chase also lost 0.9%. “I don’t think I can sit here and tell you this is going away,” Jack Ablin, founding partner of Cresset Wealth, told the CNBC.
The Turkish currency lira tumbled to a record low earlier this week for fears that Turkey’s economic troubles could slow down economic growth in other countries around the world. Turkey’s inflation rate soared to 16% last month, far above the central bank’s 5% target. To curb short selling against the lira, Turkish regulator said Wednesday it was limiting banks’ currency swap transactions, but this seems not enough to win back investors’ confidence. Pedro Martins, a strategist at J.P. Morgan, reiterated his underweight rating on Turkish equities, noting “we need to see comprehensive macro and policy response” to revisit the recommendation.
The sharp decline in Lira came after little progress made on the detention of U.S. pastor Andrew Brunson, sparking fears of U.S. sanctions. Last week, U.S. President Donald Trump already said he would support doubling metal tariffs on Turkey, who announced new levies on American cars, cigarettes and alcohol. Just today, Turkey said it secured a $15 billion investment from Qatar that could bolster its economy.
Separately, tech shares under performed on Wednesday after China’s Tencent reported its slowest revenue growth rate since 2015. Facebook, Apple, Netflix and Alphabet all traded lower. During the three months ending in June Tencent’s net income declined 2% to 17.9 billion yuan ($2.6 billion); revenue increased to 73.7 billion yuan ($10.7 billion), falling short of market’s expectation, a rare miss for the Chinese technology giant.
With Chinese government’s crackdown on online games to prevent addiction in young people, Tencent’s revenue from online games had dropped 19% from the previous quarter. The company said in a notice to players that said some game content “does not fully comply with the regulations, and the government regulator has received a large number of complaints.” Shares in Tencent dropped more than 3% on Tuesday after Chinese regulators banned a game called Monster Hunt World, and lost another 6.6% on Wednesday after the earnings were released.
