* Turkish lira skids as Erdogan dumps central banker
* Bond yields down, equity moves mostly modest so far
* Oil prices slip anew, after steep slide last week
* Global currencies vs. dollar https://tmsnrt.rs/2PmYOcE
By Wayne Cole
SYDNEY/LONDON, March 22 (Reuters) - Stocks slid and the
Turkish lira tumbled towards a record low against the dollar on
Monday after President Tayyip Erdogan shocked investors by
replacing Turkey's hawkish central bank governor with a critic
of high interest rates.
Erdogan's move shunted the lira down as much as 15%
TRYTOM=D3 against the dollar, the sharpest change since August
2018 when Turkish markets were in another of their periodic
crises. "The authorities will be left with two choices, either it
pledges to use interest rates to stabilise markets, or it
imposes capital controls," said Per Hammarlund, senior EM
strategist at SEB Research.
"Given the increasingly authoritarian approach that
President Erdogan has taken, capital controls are looking like
the most likely choice."
By 0800 GMT, the currency had recovered some of its losses
to trade around 7.9904 as Finance Minister Lutfi Elvan said
Turkey would stick to free market rules. The uncertainty saw the index of Europe's 600 largest stocks
fall 0.5% .STOXX , a milder reaction than an earlier 1.5% fall
in Japan's Nikkei .N225 as retail investors faced potential
losses on large long positions in the high-yielding lira.
Euro zone banks exposed to the country such as Spain's BBVA
BBVA.MC , Italy's UniCredit CRDI.MI , France's BNP Paribas
BNPP.PA , and Dutch bank ING INGA.AS fell between 1.6% and
5.2%.
The ripples were more modest elsewhere, with U.S. stock
futures ESc1 close to flat.
Yields on 10-year Treasury notes US10YT=RR edged down five
basis points to 1.68%, suggesting some investors favoured safe
havens.
Investors are still struggling to deal with the recent surge
in U.S. bond yields, which has left equity valuations for some
sectors, particularly tech, looking stretched.
Bonds had another wobble on Friday when the Federal Reserve
decided not to extend a capital concession for banks, which
could lessen their demand for Treasuries. The damage was limited, however, by the Fed's promise to
work on the rules to prevent strains in the financial system.
A host of Fed officials speak this week, including three
appearances by Chair Jerome Powell, providing plenty of
opportunity for more volatility in markets.
WATCHING EMERGING MARKETS
Monday's tumble in the lira saw the yen firm modestly, with
notable gains on the euro EURJPY= and Australian dollar
AUDJPY= . That in turn dragged the euro down slightly on the
dollar to $1.1890 EUR=D3 .
After an initial slip, the dollar soon steadied at 108.80
yen JPY= , while the dollar index was down slightly at 91.942
=USD .
Also supporting the yen were concerns Japanese retail
investors that have built long lira positions, a popular trade
for the yield-hungry sector, might be squeezed out and trigger
another round of lira selling.
Still, analysts at Citi doubted that the episode would lead
to widespread pressure on emerging markets, noting the last time
the lira slid in 2020, there was little spillover.
"In terms of impact on other parts of the high-yielding EM,
we believe that will be quite limited," Citi said in a note.
There was scant sign of safe-haven demand for gold, which
eased 0.7% to $1,731 an ounce XAU= .
Oil prices fell anew, having shed almost 7% last week as
concerns about global demand prompted speculators to take
profits on long positions after a long bull run. O/R
Brent crude LCOc1 was down 60 cents, or 1%, at $63.94 a
barrel by 0836 GMT. U.S. oil CLc1 was off by 56 cents, or
0.9%, at $60.86 a barrel. Both contracts fell by more than 6%
last week.
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Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
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