This week continued in decidedly risk-off mood in global stock markets, as concerns spread that Turkey’s currency tail spin could spread to all emerging markets and cause considerable damage to the Eurozone’s banking sector as well.
As so often when contagion is in the air, investors sell first and ask questions later. The exposure of European banks to the Turkish economy may be unpleasant but, on the basis of all the research we have been able to sift through, it is hardly going to constitute a systemic threat or extend to the scale of the Greek crisis. Furthermore, different to how it may be portrayed in the wider media, Turkey’s issues have been well known for quite some time and Trump’s sanction-slapping action was just another case of exerting maximum pressure on an opponent when they are on the ground already.
