Shoppers wait outside a currency exchange in the Grand Bazaar in Istanbul, Turkey, on Friday, Aug. 17, 2018. Turkish President Recep Tayyip Erdogan argued citizens should buy gold, then he said sell. Add dramatic swings in the lira, and the country’s traders are now enthusiastically doing both. Photographer: Ismail Ferdous/Bloomberg
Two red lights have caused some investors to pause for thought on Turkey. Bloomberg

Global markets continue the bull-run but have they forgotten Turkey?



Economic stress in Turkey is usually the first warning signal for an abrupt shift in risk tolerance for global markets.

The fear is that despite alarm around the Turkey crisis being dialled back, and US markets continuing to stretch out the bull market, a full-blown market event could still be brewing, just like in the past when Turkey headwinds worked their way up into a storm for developed markets several months later.

Another beacon of market stress is Dr Copper, as it too has flashed warning signals about ailments in the global economy.

The two red lights have caused some investors to pause for thought, while others have taken pre-emptive action and de-risked portfolios finding safety in cash with US Treasury yields close to 3 per cent.

Markets have been uncomfortable this year for hedge funds, fund managers, retail investors… only a handful appear to be enjoying the ride. Uncertainty is elevated, even if it’s not reflected in the CBOE Volatility Index (VIX), the so-called fear gauge.

For instance, take the bipolar view on emerging markets– that anti-emerging market sentiment had risen to peak levels, and that was before the Turkey crisis hit. Yet others see the positioning as merely a buyer’s guide, a sign that EM is well and truly ripe for a short squeeze.

Bank of America Merrill Lynch Global Research told CNBC this week that EM should lead any bounce in risk assets. Diana Amoa, fixed income portfolio manager at JP Morgan Asset Management, is also optimistic, encouraged by the performance of EM bonds during the height of the Turkey crisis. She told CNBC recently that sentiment in EM bonds was not as bad as in 2015 when everyone just wanted to get out. What could spur risk on? The obvious catalyst is any breakthrough in the trade war between the US and China.

So the question remains: are the recent signals from Turkey and copper showing a false positive?

The underlying reason why EM has struggled this year is due to the retreat by the US Federal Reserve from extraordinary monetary policy, lifting the dollar and US yields. It has also made markets more sensitive to noise such as the political wrangling from the White House on trade and everything else.

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Read more:

US Fed says Trump has little effect on decision making

Turkey back in investors' spotlight as holiday relief ends

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It’s hard to see the Fed cooling its heels near-term as it keeps a keen eye on inflation and attempts to bank some ammunition for the next crisis. Any relief rally on a trade resolution may be short-lived and it’s the same for developed markets. Technical analysts are calling a short-term pop in stock prices on Wall Street, but struggle to see how longer-term gains can hold.

Consensus is growing that the end is near for the bull market, that 2019 or 2020 will bring an end to the economic expansion that means we are in the last heady times of market ascent. But, remember market timing is often a weak area for investors, hence the common advice, don’t try and time the markets.

So is Turkey telling us the party is over? The chances are high that it will have again served as an early warning signal for investors.

Karen Tso is an anchor on Squawk Box Europe, CNBC. Follow her on Twitter @cnbckaren

The National and CNBC International are global content sharing partners.

Company Profile

Company name: Namara
Started: June 2022
Founder: Mohammed Alnamara
Based: Dubai
Sector: Microfinance
Current number of staff: 16
Investment stage: Series A
Investors: Family offices

Nepotism is the name of the game

Salman Khan’s father, Salim Khan, is one of Bollywood’s most legendary screenwriters. Through his partnership with co-writer Javed Akhtar, Salim is credited with having paved the path for the Indian film industry’s blockbuster format in the 1970s. Something his son now rules the roost of. More importantly, the Salim-Javed duo also created the persona of the “angry young man” for Bollywood megastar Amitabh Bachchan in the 1970s, reflecting the angst of the average Indian. In choosing to be the ordinary man’s “hero” as opposed to a thespian in new Bollywood, Salman Khan remains tightly linked to his father’s oeuvre. Thanks dad. 

Company Profile

Name: Direct Debit System
Started: Sept 2017
Based: UAE with a subsidiary in the UK
Industry: FinTech
Funding: Undisclosed
Investors: Elaine Jones
Number of employees: 8

If you go

The flights

The closest international airport for those travelling from the UAE is Denver, Colorado. British Airways (www.ba.com) flies from the UAE via London from Dh3,700 return, including taxes. From there, transfers can be arranged to the ranch or it’s a seven-hour drive. Alternatively, take an internal flight to the counties of Cody, Casper, or Billings

The stay

Red Reflet offers a series of packages, with prices varying depending on season. All meals and activities are included, with prices starting from US$2,218 (Dh7,150) per person for a minimum stay of three nights, including taxes. For more information, visit red-reflet-ranch.net.

 

A QUIET PLACE

Starring: Lupita Nyong'o, Joseph Quinn, Djimon Hounsou

Director: Michael Sarnoski

Rating: 4/5

Our family matters legal consultant

Name: Hassan Mohsen Elhais

Position: legal consultant with Al Rowaad Advocates and Legal Consultants.

COMPANY PROFILE

Company name: Revibe
Started: 2022
Founders: Hamza Iraqui and Abdessamad Ben Zakour
Based: UAE
Industry: Refurbished electronics
Funds raised so far: $10m
Investors: Flat6Labs, Resonance and various others

Monster Hunter: World

Capcom

PlayStation 4, Xbox One

Everything Now

Arcade Fire

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The biog

Name: Timothy Husband

Nationality: New Zealand

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Favourite book: Lemurs of Madagascar by Russell A Mittermeier

Favourite music: Billy Joel

Weekends and holidays: Talking about animals or visiting his farm in Australia

The specs: 2018 Nissan 370Z Nismo

The specs: 2018 Nissan 370Z Nismo
Price, base / as tested: Dh182,178
Engine: 3.7-litre V6
Power: 350hp @ 7,400rpm
Torque: 374Nm @ 5,200rpm
Transmission: Seven-speed automatic
​​​​​​​Fuel consumption, combined: 10.5L / 100km

COMPANY PROFILE

Company: Eco Way
Started: December 2023
Founder: Ivan Kroshnyi
Based: Dubai, UAE
Industry: Electric vehicles
Investors: Bootstrapped with undisclosed funding. Looking to raise funds from outside

RIVER SPIRIT

Author: Leila Aboulela 

Publisher: Saqi Books

Pages: 320

Available: Now

Maestro

Director: Bradley Cooper

Starring: Bradley Cooper, Carey Mulligan, Maya Hawke

Rating: 3/5

Under 19 Cricket World Cup, Asia Qualifier

Fixtures
Friday, April 12, Malaysia v UAE
Saturday, April 13, UAE v Nepal
Monday, April 15, UAE v Kuwait
Tuesday, April 16, UAE v Singapore
Thursday, April 18, UAE v Oman

UAE squad
Aryan Lakra (captain), Aaron Benjamin, Akasha Mohammed, Alishan Sharafu, Anand Kumar, Ansh Tandon, Ashwanth Valthapa, Karthik Meiyappan, Mohammed Faraazuddin, Rishab Mukherjee, Niel Lobo, Osama Hassan, Vritya Aravind, Wasi Shah

The burning issue

The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.

Part three: an affection for classic cars lives on

Read part two: how climate change drove the race for an alternative 

Read part one: how cars came to the UAE

Director: Nag Ashwin

Starring: Prabhas, Saswata Chatterjee, Deepika Padukone, Amitabh Bachchan, Shobhana

Rating: ★★★★

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How to join and use Abu Dhabi’s public libraries

• There are six libraries in Abu Dhabi emirate run by the Department of Culture and Tourism, including one in Al Ain and Al Dhafra.

• Libraries are free to visit and visitors can consult books, use online resources and study there. Most are open from 8am to 8pm on weekdays, closed on Fridays and have variable hours on Saturdays, except for Qasr Al Watan which is open from 10am to 8pm every day.

• In order to borrow books, visitors must join the service by providing a passport photograph, Emirates ID and a refundable deposit of Dh400. Members can borrow five books for three weeks, all of which are renewable up to two times online.

• If users do not wish to pay the fee, they can still use the library’s electronic resources for free by simply registering on the website. Once registered, a username and password is provided, allowing remote access.

• For more information visit the library network's website.


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