Turkey could potentially face a credit crunch or debt restructuring if the lira keeps spiraling lower, experts say.

Bloomberg has a good round-up - here’s a flavour:

While Turkey has endured a rolling crisis for years, there’s concern that the speed of the recent depreciation could have far-reaching effects.

“This is too much unorthodoxy in action,” said Ogeday Topcular, a money manager at RAM Capital. “It may start biting institutions more now and we can see an increase in debt restructurings, which may take us to uncharted waters.”

The lira fell as much as 6% to 11.3118 against the dollar, extending the biggest depreciation in emerging markets this year.

Further rate cuts likely to put more pressure on the Turkish lira, predicts Joseph Marlow, assistant economist at Capital Economics.

He writes:

We think that political pressure will continue and the CBRT’s approach looks increasingly as though it will re risk of a full-blown currency crisis akin to the one in 2018. Back then, the lira’s freefall forced the CBRT into a sharp rate hike, and it would probably require something similar to end the lira’s fall this time around. But policymakers now seem to be more tolerant of a weaker lira, so a very high bar would need to be cleared in the form of severe lira weakness before the CBRT even considers hiking rates.

Admittedly, Turkey’s current account balance is in a much better position than it was in 2018, but large short-term external debts and low FX reserves mean that the lira is vulnerable to shifts in external financing conditions. The recent rise in US Treasury yields has no doubt contributed to the falls in the lira and we think gradual policy normalisation in the US will lead to higher US yields and further pressure on the lira.

The former Formula One team owner Eddie Jordan is part of a consortium considering making a £3bn offer for Playtech, as the London-listed gambling software supplier becomes the focus of a potential bidding war.

Last month, Playtech’s board recommended shareholders accept a £2.7bn takeover offer from Aristocrat, the Australian slot machine developer, and a rival offer from its second-biggest shareholder Gopher Investments.

JKO Play, the consortium set up by Jordan and Keith O’Loughlin, who formerly ran the sports betting operation of the Nasdaq-listed Scientific Games, confirmed it was “evaluating making a competing offer for Playtech”. JKO is in talks with the US-based investment firm Centerbridge, among other potential partners, to finance a cash and shares offer for the business.

In the City, the FTSE 100 dropped to a two-week low, ending 0.5% lower at 7256 points.

Royal Mail led the risers, surging almost 10%, after announcing its £400m windfall for shareholders after a boost to profits this year.

Housebuilders also had a strong day, with Persimmon (+4.8%), Berkeley Group (+3.9%), Taylor Wimpey (+3.75%) and Barratt Development (+3.6%) also in the risers, after smaller rival Crest Nicholson reported that profits would be slightly ahead of forecast.

Cyber-security group Darktrace lost another 4.6%, though, while miners and pharmaceuticals firms also filled the fallers table (Glaxo went ex-dividend).

Michael Hewson of CMC Markets says pandemic worries weighed on shares:

Talk of tighter covid restrictions being rolled out incrementally across Europe appears to be tempering risk appetite, over concerns of lower demand heading into the winter months.

The FTSE100’s struggles have continued today, this time feeling the effects of GlaxoSmithKline going ex-dividend, while weakness in BP and Royal Dutch Shell, due to the slide in oil prices overnight, which has acted as another significant drag on overall sentiment.

Wider concerns about enduring inflation also appear to be limiting the appetite for further strong gains, even as bond yields also slip back from their recent highs.

The European stock market rally took a shunt today.

The Stoxx 600 fell by 0.5%, after six days of gains that had pushed the index to fresh record highs.

Oil stocks weakened, as the prospect of China moving to release strategic fuel reserves weighed on the markets. Miners also fell, as copper prices hit their lowest in more than a month.

Financial stocks also fell, as did healthcare, but real estate and consumer cyclicals had a better day.

Some late news percolating through - Unilever has agreed to sell its global tea business to CVC Capital Partners in a €4.5bn deal.

The agreement comes nearly two years after Unilever first lifted the “for sale” sign over the business, which includes a host of well-known brands including Lipton, Brooke Bond and Pukka Herbs.

The business, called Ekaterra, generated revenues of around €2 billion in 2020. Unilever decided to spin off the tea business because younger consumers were more focused on other drinks like coffee and fashionable herbal teas.

Today, Alan Jope, CEO of Unilever said:

“The evolution of our portfolio into higher growth spaces is an important part of our growth strategy for Unilever. Our decision to sell ekaterra demonstrates further progress in delivering against our plans.

Unilever is holding onto its India, Nepal and Indonesia tea operations as well as its Pepsi Lipton ready-to-drink Tea joint venture.

2022 will be a year of discovery for the UK too.

Caroline Simmons, UK chief investment officer at UBS Global Wealth Management, says:

It will likely be the first year in two years that we don’t have any lockdowns. We will discover what our new normal of working and leisure are. Meanwhile, markets will be focused on discovering where inflation and monetary policy end up.

We see upside to the FTSE 100 to 7900 by December 2022. In the UK equity space in the near term, we expect a value style to continue to outperform given the expectation for rising rates and inflation.”

The FTSE 100 has just closed at 7256 points, so that does suggest gains over the next 13 months (Caveat emptor and all that...)

Turkey’s central bank looks to be a shambles, says Craig Erlam, senior market analyst at OANDA.

He explains that the threat of another rate cut in December, on top of today’s move, sent the lira to record lows:

The Turkish central bank took the unusual step of cutting rates in line with market expectations today and even suggested it will assess ending rate cuts in December. I’m not sure if that counts as hawkish by its standards or if we’ve now just come to expect the ridiculous.

It did suggest it may ease again in December though, at which point there was no saving the lira which plunged to a new record low against the dollar, with the USDTRY pair breaching 11, only three days after hitting 10 for the first time ever.

There’s clearly no indication that the CBRT is being deterred by anything that’s happening in the markets. The central bank is a shambles and the website crashing and delaying the announcement could not have been more symbolic of what’s happening behind the scenes.

A closely watched survey of factories in the US mid-Atlantic region has shown a surge in activity -- a good sign for America’s economy.

The Federal Reserve Bank of Philadelphia’s factory sector index jumped from 23.8 in October to 39.0 for November.

Economists had expected a decline to 22.0 (any reading over zero shows conditions are improving)

Businesses reported that new orders jumped, with this gauge surging 16.6 points to 47.4. That’s the highest reading since the survey began in 1973, showing strong sales.

Unfilled orders also jumped, suggesting that supply chain problems and staff shortages are still hitting production.

But the six-month business outlook index also rose.

Here’s some expert reaction:

More central bank news. South Africa’s central bank has raised its main lending rate for the first time in three years.

The South African Reserve Bank (SARB) lifted borrowing costs by 25 basis points to 3.75%, reacting to growing inflation risks.

Governor Lesetja Kganyago told a news conference that inflation risks had increased since the last meeting in September, so an increase in borrowing costs should keep expectations under control.

“Given the expected trajectory for headline inflation and upside risks, the committee believes a gradual rise in the repo rate will be sufficient to keep inflation expectations well anchored and moderate the future path of interest rates.”

It was a close vote, though -- the SARB’s monetary policy committee split 3-2; the committee still expecting inflation to stay close to the midpoint of its target range over the forecast period. More here.

Here’s Robert Frick, corporate economist at Navy Federal Credit Union, on today’s small drop in new US jobless claims:

“Weekly unemployment insurance claims only ticked down by 1,000 in the most recent week, and while there is a link between claims and COVID-19 cases, and those cases have started rising, it’s too early to say there’s a correlation.

We are still within striking distance of the pre-pandemic level of claims by year’s end should we stay on trend of 5,000 to 10,000 fewer per week.”

Back in the City, a brokerage is planning to give its staff unlimited holiday, in an attempt to prevent them burning out.

Bloomberg has the story:

After a blockbuster year for capital markets and a pandemic to boot, FinnCap Group Plc will allow its employees to take as many vacations as they want in the hopes of preventing staff burnout.

The London-based broker is changing its vacation policy to offer employees unlimited paid breaks from 2022, Chief Executive Officer Sam Smith said in a phone interview Thursday.

The firm’s investment bankers, salespeople and other staff will be required to take at least four weeks a year and two or three days a quarter, according to Smith.

“There’s not a maximum, there’s a minimum you must take,” she said. “The rest is up to you.”

More here.

In the US, the number of Americans filing new unemployment claims has dipped to a new pandemic low, as firms hang onto staff in the fight to hire workers.

There were 268,000 initial claims last week, down from 269,000 the previous seven days.

That’s closer to pre-pandemic levels, extending the recent recovery as the US economy has reopened, and the surge in Delta variant cases has receded.

CNBC’s Emily Pandise has more details:

Today’s interest rate cut shows that Turkish president Erdoğan is driving monetary policy, rather than the Central Bank of the Republic of Turkey.

So says Fawad Razaqzada, analyst at ThinkMarkets, who warns monetary policy ‘is in tatters’:

The market clearly doesn’t take the CBRT seriously anymore, as it has lost any little credibility it had. Erdogan is running the show. If he wants lower interest rates he will get lower rates, regardless of how high inflation might be or how the economy is doing. So, with the CBRT head saying the central bank will consider ending rate cuts in December, then he might as well consider a new job!

It is very difficult to see the light at the end of the tunnel for the Turkish lira unfortunately. The slumping currency may make holidays cheaper and boost exports. But foreign demand for Turkish products and services will have to rise materially to offset the negative impact of the currency crisis and inflation on the economy. If the TRY is to find support, it will have to come from fiscal policy as monetary policy is in tatters.

Last month Erdoğan dismissed three central bank policymakers, two of whom had opposed an earlier rate cut.

Turkey’s central bank has hinted that it ease policy again next month, continuing its cycle of controversial interest rate cuts which have hammered the lira.

Announcing its latest rate cut, its policy committee warned that inflationary pressures will remain high in the first half of next year.

As such, it could ‘complete’ using the room available next month (many analysts question whether it had any space for its existing cuts, let alone more....)

They say:

The Committee expects that the transitory effects of supply-side factors and other factors beyond monetary policy’s control on price increases will persist through the first half of 2022.

The Committee will consider to complete the use of the limited room implied by these factors in December.

The CBRT also flags that Covid-19 variants continue to weigh on the recovery:

Despite the recovery in global economic activity in the first half of the year and the increase in the vaccination rate, new variants keep the downside risks to global economic activity alive. Recovery in global demand, high course of commodity prices, supply constraints in some sectors and rise in transportation costs have led to producer and consumer price increases internationally.

Unfavorable effects of weather conditions in major agricultural commodity exporting countries are observed on global food prices.

Today’s losses cement the lira’s position as the worst performing major emerging market currency this year:

Back in the markets, Brent crude remains below the $80/barrel mark, as China prepares to release some oil stocks and the US pushes for a coordinated move.

Raffi Boyadjian, lead investment analyst at XM, says:

Crude oil prices were headed south as well amid a push by Washington to get other countries on board with its plan to release oil from the strategic reserves. President Biden has reportedly asked China, Japan, India and South Korea to tap into their reserves to ease the energy crisis after OPEC refused to boost its supply. Although no decision has been made, China seems willing to join the US in coordinated action to relieve the pressure on soaring fuel prices.

WTI futures were last trading at six-week lows below the $78/barrel level, having started the week above $80, while Brent futures were defending the $80/barrel level.

Former Daily Mail editor Paul Dacre is to receive a payout of almost £2m, as the top executives at parent company DMGT share £33m in pay, bonuses and share awards this year – while staff brace for job cuts.

Dacre, who stood down as editor in 2018 and until earlier this month was chair and editor-in-chief of the paper’s parent company Associated Newspapers, is to receive the payout in December under one of Daily Mail and General Trust’s long-term incentive plans for senior management.

The vesting of the award of 168,851 shares, worth about £1.9m at DMGT’s current share price, relates to the hitting of performance targets in 2019. The award follows a payout of £1.5m given to Dacre last December.

Dacre’s payout is dwarfed by that of the top four directors at DMGT, which is in the process of being taken private by the Rothermere family after 90 years on the London Stock Exchange, who took home a combined £33m in salary and share awards in the year to the end of September....

More here:

Three-quarters of UK businesses who trade abroad experienced a challenge importing in late October to early November 2021, according to the ONS’s latest survey.

It also found that 64% of firms saw challenges exporting.

That’s up from 52% for exporting and 60% for importing in late September 2021, the ONS reports, adding:

The data also suggests that businesses continue to be more likely to experience a challenge when importing rather than when exporting.

Change in transportation costs, additional paperwork, customs duties or levies and disruption at UK border were the top problems:

The survey also found that approximately one in six (17%) of the workforce were estimated to be using a hybrid model of working in late October; rising to 21% across firms with 100 employees or more.

Multipacks of crisps have replaced frozen turkeys as the item in shortest supply in UK shops.

The Office for National Statistics reports that multipack crisps were in limited supply at three in 10 stores surveyed last week (4% had run out, and 26% were running low).

Paracetamol and Ibuprofen were also in short supply, as the nation stocked up on painkillers in the face of autumn bugs.

Frozen turkeys, which topped the shortages list last week, were still flying out of the door at some locations. Around 10% of shops had run out, and 5% were running low, after shoppers prepared early for Christmas.

But Britain isn’t running out of beer; 71% of outlets had high availability, according to Kantar’s survey.

Naked Wines has slashed its sales forecast as drinkers return to bars and wineries as lockdowns lift, and its customer recruitment push was less successful than hoped.

Naked sells wine from independent producers to its network of ‘Angel’ subscription customers. It reported that it faces a changing market environment, as wine consumers “sought in-person experiences” as they emerged from lockdowns.

The change has been strongest in the US, where much of the country has embraced a chance to return to somewhat of “life as normal”.

In the wine category that has played out with traditional wineries reporting record revenues, boosted by extremely strong winery visitation rates.

Naked is now cutting its investment in new customers this year, to between £35m and £45m, from £40m-£50m. That will knock millions off sales -- which are now expected to come in between £340m and £355m, down from £355m-£375m previously.

Naked posted a £1.3m profit in the first half of the financial year, up from an £8.9m loss, and grew its active customer base by 25% to 947k.

But CEO Nick Devlin admits the firm made some mistakes.

Naked spent approximately £2 million to acquire new customers at below its preferred payback, he says.

Some deals didn’t perform as well as hoped, and it was also hit by higher advertising costs on Facebook and reduced targeting effectiveness after privacy changes to Apple’s iOS operating system.

Supply chain disruption hurt its ability to get wine and glass onto markets on schedule, and drove up warehousing and transport costs.

And there have been problems getting deliveries out on-time and in-full.

Too many customers have experienced delays to delivery or substitution of items - and for that we are sorry. Financially we know that any compromise to the delivery experience of a new customer is especially costly.

Devlin insists that the wine industry is ripe for disruption:

Our disruptive business model connects consumers directly with winemakers, stripping out the cost of traditional sales and distribution and delivering consumers exclusive world-class wines at fair prices and with a genuine connection to their maker.

Shares have tumbled 18% this morning to 545p, the lowest in almost a year, and down from almost 900p in September.

ii’s Victoria Scholar tweets the details:

Many UK pay rises are not keeping pace with inflation, a new report shows.

The average pay deal across the UK is worth just 2%, despite a rise in prices that pushed the retail prices index (RPI) – a widely used measure of inflation in pay bargaining – to 6% this month.

According to the latest figures from the consultancy XpertHR, pay bargaining across some of Britain’s biggest private and public sector employers showed median basic pay increased 2% in the three months to the end of October, unchanged for the seventh consecutive month.

The firm said:

“The data shows that pay awards are at the same level as this time last year and confirms a period of stability after awards dipped in the middle of 2020 and the beginning of 2021.”

The global semiconductor shortage has pushed European car sales to a record October low.

New car registrations in the European Union tumbled by over 30% in October, the European Automobile Manufacturers’ Association reports.

Just 665,001 cars were sold in the region, which is the weakest result any October since records began, and the fourth monthly fall in a row.

Most EU markets suffered double-digit losses, including the four largest ones: Italy (-35.7%), Germany (-34.9%), France (-30.7%) and Spain (-20.5%).

EU sales so far this year are only 2.2% higher than in 2020, although Germany is lagging.

ACEA says:

Despite the recent drop in sales due to the ongoing impact of the semiconductor supply crisis, substantial gains earlier in the year helped to keep cumulative volumes in positive territory.

Likewise, demand remained positive in three out of the four key EU markets: Italy (+12.7%), Spain (+5.6%) and France (+3.1%). By contrast, Germany’s year-to-date performance has worsened compared to one year ago (-5.2%).

The UK market suffered a similar shunt. Sales hit a 30-year low, falling by 24.6% compared with October 2020.

Shares in UK challenger bank Metro have slumped by nearly a fifth after takeover talks with US private equity firm Carlyle broke up.

Carlyle announced this morning that the two sides have agreed to terminate discussions regarding a possible offer for the Company.

Metro says its board “continues to strongly believe in the standalone strategy and future prospects of Metro Bank”.

Shares are down 18% at 107p, slightly above their 103p level two weeks ago before news of the talks broke, sending Metro shares soaring.

Metro launched in 2010 as Britain’s first new high-street lender for more than a century, and had hoped to challenge the Big Five banks in the aftermath of the financial crisis. But a major accounting error in 2019 rocked the bank, forcing it to rein in its expansion plans.

Shares in National Grid have nudged 0.5% higher after it said profits this year will be significantly higher than forecast.

National Grid lifted its outlook despite the fire in September at Britain’s main subsea cable with France — called IFA1.

As the FT points out:

National Grid did not offer any update on the cause of the fire at a site in Sellindge in Kent, where underground cables connect to a converter station, other than to say the blaze caused “significant damage to infrastructure on site”.

The possible shift towards a more balanced oil market has pulled Brent crude away from October’s three-year highs, explains Victoria Scholar, head of investment at interactive investor:

Oil is pushing lower once again today. Brent crude and WTI have broken below critical support turned resistance at $80 a barrel this week with bearish momentum sending the benchmarks down to lows not seen since the first week of October.

Brent crude has now retraced more than a third of the gains it enjoyed since the trough in August with losses accelerating in recent sessions, signalling a potential shift towards a more balanced market as supply catches up with demand.

Shares in oil companies are dropping this morning too, with Royal Dutch Shell down 1.5% and BP off 1.2%, tracking the move in crude.