Europe close: Stocks finish flat despite another move lower for single currency
Stocks on the Continent ended the session little changed, alongside a bounce in the Turkish currency, the lira, even as the euro fell to
Nevertheless, in the background analysts were busy trying to anticipate the next move by Turkish authorities and the lira's next move.
The lira strengthened on Tuesday, as the Turkish central bank tightened liquidity conditions by foregoing a one-week repurchase liquidity auction for a second day, and pulled a 10-year government bond sale.
Nevertheless, according to analysts at Oxford Economics, time was not on the side of Turkish officials.
"The authorities need to act decisively, but, history suggests that they will instead procrastinate, meaning pressure on the TRY will persist. Turkey is on the verge of getting caught in a self-inflicted vicious circle that leads to a full-blown balance of payments crisis," they told clients in a research note.
Against that backdrop, by the end of the day the US dollar was retreating by 6.49% to 6.4370 lira, with the Borsa Istanbul 100 benchmark equity index advancing by 0.79% to 93,418.65.
The benchmark Stoxx 600 was up by 0.00% or 0.01 points alongside at 384.92, together with a 0.13 point advance for the German Dax to 12,358.87. The FTSE Mibtel on the other hand was lower by 0.30% or 62.91 points to 20,906.35.
Euro/dollar meanwhile was 0.66% lower to 1.13328 and the yield on benchmark 10-year Italian government debt by seven basis points to 3.03%.
Italian stocks dipped despite reports overnight that the country's Prime Minister, Giuseppe Conte, and his top ministers had met and agreed that the 2019 budget would be compatible with stable public finances and a decline in the ratio of public debt to gross domestic product.
Commenting on the situation in Turkish financial markets, analysts at Jefferies said: "The bottom line is that the longer the central bank desists from hiking rates the more likely some kind of capital controls will be adopted.
"We remain Bearish on Turkey within our Global Asset Allocation. We don’t believe there is significant contagion risk to other EMs."
For his part, David Kohl at Julius Baer chipped-in: "The Turkish lira has depreciated dramatically over the last few days. However, it is not the overall macro backdrop of Turkey that is so disastrous as to justify the sharp drop of the currency.
"Economic activity, including export dynamics and domestic demand, is actually growing at a solid pace. The sharp depreciation of the currency is driven by the fact that the Turkish economy is in constant overheating mode, with inflation above 15%."
To take note of, a barrage of economic indicators released overnight in China came in below analysts' projections.
Tuesday also brought with it a flood of economic data in Europe with most indicators printing either in-line with economists' forecasts or ahead of them.
Significantly, the ZEW institute's gauge of economic expectations for Germany fell by 11.0 points in August to reach -13.7, which was much better than the improvement to a reading of -20.0 anticipated by economists.
Nevertheless, the ZEW itself emphasised that it remained "significantly below" its long-term average value of 23.0 points.
In parallel, Eurostat reported that Eurozone GDP expanded at a quarter-on-quarter pace of 0.4% over the three months to June (consensus: 0.3%).
Stock in Italian construction outfit Atlantia was a standout faller following the collapse of a segment of a suspension bridge in Genoa that it was working on and which reportedly left at least 35 people dead.