LONDON

World share markets regained their footing on Tuesday as the threat from the collapse of the Turkish lira ebbed and reassuring German data offset signs of slowing growth in China.

After three weeks of losses, Turkey’s lira finally recovered as the country’s central bank moved to ease pressure on the currency, triggering a 7 per cent surge to 6.4 per dollar. It still lost almost 10 per cent on Monday alone and has shed more than two-fifths of its value so far in 2018.

The rot also stopped for the South African rand, the Russian rouble and the Argentine peso. Argentina’s central bank unexpectedly raised interest rates by 5 percentage points on Monday. Even so, the peso hit a record low.

“These things get very volatile in both directions once you have had a really big move,” Saxo Bank’s head of FX strategy John Hardy said. “To suggest this thing is over, you would have to see that Turkey is isolated. I’m not there yet and I don’t think the market is there.” European shares also bounced back after two days of selling as anxieties over contagion from the Turkish currency crisis eased.

After falling to a 21-month low on Monday, Eurozone bank stocks rose 0.8 per cent versus a 0.4 per cent gain by the pan-European STOXX 600 cross-sector benchmark.

Data showed the region’s largest economy, Germany, picked up more steam than expected in Q2, although the bounce might have been stronger had surveys from China not proved softer than expected.

Chinese retail sales, industrial output and urban investment all grew by less than forecast in July, a trifecta of disappointment that underlined the need for more policy stimulus in China even as trade risks intensify.

The Shanghai blue-chip index was off 0.9 per cent and weighing on MSCI’s broadest index of Asia-Pacific shares outside Japan, which eased 0.25 per cent.

Moves elsewhere were mixed. Japan’s Nikkei rose 2.3 per cent and Australian stocks added 0.8 per cent.

Back to the futures

EMini futures for the S&P 500 were still a fraction higher. Ten-year Treasury yields held at 2.88 per cent.

Investors were encouraged that US declines were only minor overnight after the losses by the lira and other emerging-market currencies. The Dow ended Monday down 0.5 per cent, the S&P 500 lost 0.4 per cent and the Nasdaq fell 0.25 per cent.

“The more significant emerging-market concern relates to the risk that regional underperformance becomes a source of disruption through swings in capital flows and currencies,” said Matt Sherwood, head of investment strategy at Perpetual.

“While the focus at present is on Turkey, where currency depreciation and rising rates has translated into a marked tightening of financial conditions, it could spread to Mexico, Brazil and India.” Sherwood cited the NAFTA negotiations as a key risk for Mexico and upcoming elections in Brazil and India as potential threats for those two markets.