Turkey Wake up call: Macro, Political and Equity News, 5th August

BIST took a 3.53% dive yesterday as the surge in TRY swap rates in London swap market to over 1,000% seemed to have triggered a wave of selling from foreign investors. Market actually had a positive open as Turkish markets returned from the 4.5-day Eid break and found further support from the CPI and PMI releases in early going. But the gains could not be sustained and the index slipped into negative territory after mid-day and continued its downtrend before staging a partial recovery in the last 30 minutes. Banks lost 3.69% on average, broadly in line with the main index. BIMAS, SOKM, PETKM, TUPRS, TATGD, REITs, cement producers, power gencos, and MPARK were among the worst hit while EREGL and aviation stocks stood out as the handful of gainers in the BIST100 space. Today, our local macro agenda showcases Central Bank's July'20 real effective FX rate due at 2:30PM local time. The CPI-based index might decline further from its 69.32 mark for the previous month given ~4.3% depreciation of lira vs the currency basket dwarfing the 0.58% headline CPI print for July. BIST seems off to a small positive start in reaction to yesterday's sell-off and given the overnight 0.2-0.3% gains in U.S. markets. U.S. futures are up about 0.2% in early trades while Asian equities are trading mixed.