Global equities were hesitant Monday as traders balanced vaccine-driven optimism against fears of spiking inflation – and also tracked brewing turmoil in Turkey, dealers said.

Asia and Europe were mixed after a largely negative pre-weekend lead from Wall Street, despite global stimulus programmes aimed at countering the massive economic fallout from the coronavirus pandemic.

Wall Street also opened mixed on Monday.

Oil prices were higher and the dollar dipped against the euro and yen.

The Turkish lira meanwhile plunged nearly 15% in early trade after President Recep Tayyip Erdogan sacked the country’s market-friendly central bank chief Naci Agbal and replaced him with former ruling party lawmaker Sahap Kavcioglu.

Erdogan’s move has thrown independence of the central bank into question and raised fears of a new bout of financial turbulence in the country that could have repercussions worldwide.

“Vaccination programmes, fresh fiscal stimulus and ongoing monetary stimulus from central banks are all fuelling hopes for a strong bounce back in economic output and corporate profits,” said AJ Bell investment director Russ Mould.

“But this means investors are potentially more exposed now to unexpected shocks – and Turkey could yet provide one. One thing that could be capable of knocking markets off their stride – beyond a resurgence of the virus – is an old-fashioned emerging markets wobble,” Bell warned.

After a year-long rally, investors are now struggling to maintain the momentum as US government bond yields push ever higher – a sign that investors believe that the Federal Reserve’s interest rates will rise to combat mounting inflationary pressures.

Published in The Express Tribune, March 23rd, 2021.

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