World Markets Negative Despite Rate Increases in Turkey, S. Africa

Nichole Harper
29 Jan, 2014
New York City

World markets remained on the edge after emerging markets sell-off continued. Turkey nearly doubled its main interest rates and South Africa raised its key lending rates for the first time in nearly six years. Seven largest world market indexes turned negative in 2014.

[R]12:15 PM New York – World markets remained on the edge after emerging markets sell-off continued. Turkey nearly doubled its main interest rates and South Africa raised its key lending rates for the first time in nearly six years. Seven largest world market indexes turned negative in 2014.[/R]

World markets turned lower after emerging markets sell continued and despite central banks in Turkey and South Africa lifted rates.

S&P 500 index decreased 7.49 or 0.4% to 1,785.01 and the Nasdaq Composite index fell 11.45 or 0.3% to 4,086.51.

Turkey Lifts All Main Interest Rates

Turkey’s central bank Governor Erdem Basci approved rate increase for all its main interest rates at an emergency late-night meeting and reversed its policy to keep rate on hold since August.

The Ankara-based bank said one-week repo rate should be now be treated as the benchmark policy rate from its earlier focus on overnight lending rate.

The central bank lifted one-week repo rate to 10 % from 4.5%, a sharp increase and overnight lending rate to 12% from 7.75% and the overnight borrowing rate to 8% from 3.5%.

Despite the sharp increase in rates, Turkish lira declined 2.4% and reversed its earlier gain in the day of 4% after the increase in rates announced at mid-night.

Lira traded last at 2.2592 against one dollar and the Borsa Istanbul 100 Index closed down 2.3%.

The index in 2013 declined 13.3%, fourth worst performing market index in the world.

South Africa Lifts Rate

Monetary Policy Committee lifted rates in South Africa to stem the falling rand. But despite the increase in rates, the rand declined 2% to 11.24 a dollar.

The rate setting committee lifted its repurchase rate to 5.5% from 5%, the first rate increase since June 2008.

European Markets

European markets trimmed earlier losses after markets in New York opened slightly better.

Indexes dropped as low as 1.7% in Germany and France after Turkey and South Africa lifted rates but nervous investors sold emerging market currencies.

In London trading, FTSE 100 index dropped 0.4% or 24.54 to 6,548.03 and in Frankfurt the DAX index declined 0.7% or 65.43 to 9,342.48.

In Paris, CAC 40 index plummeted 0.6% or 26.91 to 4,159.37.

U.S. Stocks in Review

AT&T ((T)) dropped 4.5% after the second-largest wireless carrier estimated 2014 earnings growth in “mid-single-digit” compared to most analysts’ estimate of at least 6% increase.

Boeing ((BA)) declined 5% after the largest planemaker estimated lower than expected profit for 2014.

The aerospace and defense company also estimated a slowdown in the new order flow after second best year in 2013.

Dow Chemical ((DOW)) increased 5% after the largest U.S. chemical maker increased first-quarter dividend 16% to 37 cents.

The chemical maker also expanded its stock buyback plan to $4.5 billion from $1.5 billion.

Yahoo declined 7% after the Internet portal and media organization forecasted weak first-quarter outlook.

Yahoo! Inc ((YHOO)) plunged 7% or $2.69 to $35.53 after the online portal manager said revenues in the fourth-quarter ending in December dropped 6% to $1.2 billion.

Net income in the quarter climbed 27.9% to $348.2 million or 79 cents a diluted share compared to $272.3 million or 61 cents.