Turkish stocks plunged on Monday as the threat of US sanctions and punitive measures by the European Union weighed on sentiment and pushed the lira sharply lower. “Big sanctions on Turkey coming!”, Donald Trump said, in a tweet, before asking if anyone “really think[s] we should go to war” with a NATO member.
The Borsa Istanbul 100 dropped more than 4.5%, and now trades below its 50-, 100-, and 200-day moving averages.
Over the weekend, Turkish-backed fighters in Syria were seen committing war crimes along a strategic highway seized during Recep Tayyip Erdogan’s brutal offensive which has left hundreds dead and more than 100,000 displaced in less than a week.
The lira, meanwhile, fell some 0.9%.
State banks – which reportedly spent $3.5 billion propping up the currency last week – were active again on Monday, but to no avail.
The Trump administration continues to insist that Treasury is “ready to go” with crippling sanctions which could go as far as cutting Ankara off from the US financial system, a move that would crash the foreign capital-dependent economy virtually overnight.
Trump on Monday claimed the Kurds are deliberately letting ISIS fighters flee in order to compel the US to send forces back into the area.
“Kurds may be releasing some to get us involved. Easily recaptured by Turkey or European Nations from where many came, but they should move quickly”, Trump tweeted.
Insult to injury for Turkish assets was data showing a twelfth straight month of declining industrial output.
The White House is largely responsible for last week’s escalating violence in northeastern Syria. Trump’s decision to allow Erdogan to go ahead with a long-threatened incursion targeting America’s Kurdish allies rankled lawmakers at a delicate juncture for a president facing impeachment.
Although Trump is keen to preserve his relationship with Erdogan, the US president has, at times, shown a willingness to hit Turkey hard. In the summer of 2018, sanctions in connection with the detention of Christian pastor Andrew Brunson exacerbated a burgeoning currency crisis, which Trump made even worse by raising tariffs.
New sanctions tied to the spiraling humanitarian crisis in Syria are now a political necessity for Trump, especially considering lawmakers were already aghast at Erdogan’s refusal to heed US warnings against purchasing Russian-made missile systems over the summer.
If the intraday losses hold, Monday would be the third-worst day for Turkish equities since the coup attempt.
Local bond yields are surging. The market appears to be one tweet away from a panic.