Erdogan Settles the Markets
Capital markets are influenced no less by theater and drama than any other human endeavor, viz President Erdogan of Turkey saying that he would “let the banks do what needed to be done” with respect to the country’s interest rate after calling that very rate the mother and father of Satan the previous day. This perceived back pedaling form taking control of yet another Turkish lever of power gave the Lira a slight respite from its free fall in value. It is a temporary lull.
Brent Keeps Moving Up
The world’s benchmark crude oil, called Brent, is on the move up. The prices for liquid petroleum are going to get a lot higher before they finally start to come back to their equilibrium levels. They are being manipulated by the OPEC cartel and its cooperating non-members for the purpose of keeping price as high as possible. They are also aided by the US repudiation of the JCPOA whose sanctions reimpostion is not scheduled to start until November. We saw yesterday the first fear of sanction act by a major oil concern as Total the French giant reneged on a $100m investment it was planning to make in the Pars gas field in Iran out of fears of running afoul of those yet to be reimposed sanctions. It is going to get a lot worse before it gets better.
The Paris stock market index continues to encourage the buyers by moving steadily higher. It has nearly recovered the totality of the declines begun in February. Barring unforeseen exogeneities, we expect the index to breach 5568 in the near term thus sending it back to the level it was at in late February.
Turkey does produce certainty in one area of its economic life: That the economy is steadily running itself into the ground. The value of the Lira evaporates before our very eyes.