FTSE 100 subdued as Turkey sacks central bank chief and Covid third wave grips

he FTSE 100 made a subdued start to the week today as global market sentiment was battered by Turkey’s decision to remove its central bank chief.

The Turkish lira plunged more than 16% against the dollar after president Recep Tayyip Erdogan replaced Naci Acbal after just months in the job.

Acbal had restored some international credibility among investors with his view that interest rates needed to be raised to keep a lid on inflation in the country.

News that he was being replaced was announced on Saturday and had an instant impact on the currency, also triggering fears investors would pull out of the country’s other assets in the coming days.

The lira had been the best performing emerging market currency in the world this year as investors applauded Acbal’s stance that tighter monetary policy was needed to tame 15% inflation in the country.

His replacement is the unknown Sahap Kavcioglu, a former politician in the ruling Justice and Development party. He recently wrote an article declaring that higher interest rates would lead to higher inflation – an unorthodox view shared by few, including Erdogan.

Asian markets had a cautious start to the week, which followed through into European trading. The tense high level China-US talks have soured sentiment somewhat, as investors brace for what looks like a continuation of an atmosphere of suspicion between the two countries under Joe Biden.

Europe’s slow rollout of vaccines continue to trouble markets, weakening sentiment in travel stocks as the continent fails to deal with the third wave of Covid currently gripping countries there. British Airways owner IAG and aero engines maker Rolls-Royce fell 6% and 3% respectively.

News that the South African variant appears to be prevalent in French cases is likely to spook the FTSE and other global markets for some while due to the AstraZeneca vaccine’s reduced efficacy with that strain.

AstraZeneca had a decent start to the week, gaining 2% after US medicines regulators found its vaccine to be effective and safe.

The FTSE opened lower then spent the rest of the morning clawing its way back up to Friday night’s closing levels. By the afternoon it had managed to climb back into positive territory, just. The index was up 11.82 at 6730.69.

Broker Jefferies published a note for clients reporting that global investment in value stocks – those considered cheap in relation to their assets or dividends – had surged again last week.

Tracking the market for exchange traded funds – a popular way of investing tax efficiently – it found investment flows into global equities reached a new high for the sixth straight week with the US attracting most.

UK asset flows were up $580 million, alongside the $1.6 billion in developed Europe stocks, where only Germany fell. Biggest sectors to gain were IT, consumer goods, healthcare, industrials, telecom services and financials.

Kingfisher, Rightmove and NatWest were the biggest gainers, with gains of 2%-3%.

Besides IAG and Rolls-Royce, Melrose and Next were heavy fallers, both down 2%.

Hargreaves Lansdown shares could slip after a new class action case was announced against it by investors who felt it badly advised them to invest in Woodford Equity Income. RGL Management issued a statement yesterday saying it already had many Woodford investors signed up and that it was a lower cost alternative to other class action suits.

Meanwhile, the Financial Conduct Authority continues to ignore calls to hand over its inquiry into the Woodford collapse to an independent investigatory body. Politicians and consumer advocates have warned the FCA’s own failures to regulate Woodford would be unlikely to receive proper scrutiny in a review of itself.

The oil price will continue to dominant FTSE action after last week seeing the biggest weekly drop since October on global economic wobbles. BP and Shell’s shares tend to react in lockstep with the price of crude.

All eyes this week will be on tomorrow’s…