That’s all for today. Thanks for reading and commenting. GW

Bloomberg is reporting that Turkey’s crackdown on speculation is quite unprecedented, and could undermine confidence in the country.

Here’s their latest take:

Investors dumped Turkish bonds and stocks on Wednesday after the nation orchestrated a currency crunch to prevent the lira from sliding days before an election that will test support for President Recep Tayyip Erdogan’s rule.

The cost of borrowing liras overnight on the offshore swap market soared past 1,000 percent at one point on Wednesday because local banks are under pressure not to provide liquidity to foreign fund managers who want to bet against the lira. A government official said the measures are temporary.

This has forced investors who want out of their lira positions to instead sell other Turkish assets to get the cash they need to close those trades. The yield two-year on Turkish bonds jumped above 20 percent and stocks slid the most since July. Fund managers including Japan’s Daiwa SB Investments Ltd. said they are rethinking investments in the country.

“I’ve never seen a move like this in the 21 years I’ve been watching this market,” said Julian Rimmer, a trader at Investec Bank Plc in London. “This amounts to sacrificing long-term pragmatism for a short-term political expedient. Such tactics will make many traders question the investability of the lira.

Here’s our news story on the Turkish currency ructions:

Our economics editor, Larry Elliott, fears Turkey’s crackdown on currency speculators could hurt the global economy, perhaps badly.....

The assumption in the financial markets is that Turkey is a one-off and that there will be no ripple effects. That, though, is what the markets always say.

But the global economy is slowing, central banks have shelved plans to raise interest rates, investors are prepared to accept negative yields for the security of holding German bonds and the yield on a 10-year US bond is below that on a three-month bond – in the past a signal of a recession in the offing. Sometimes it only takes a spark and Turkey could easily provide it.

Capital Economics analysts suspect Turkey has been intervening to support the lira today:

In Emerging Europe, Turkey’s financial markets came under renewed stress on Wednesday....

The lira was down by 2% against the dollar, although there appeared to be heavy intervention (probably by state banks) to limit the fall.

CNBC says Turkey is struggling to defend its currency ahead of Sunday’s elections, forcing Ankara to restrict access to the lira.

The slide in Turkey’s equity market came as the government directed the country’s banks to withhold lira liquidity from the offshore swap market in an attempt to keep the lira from falling sharply.

This sent the overnight Turkish swap rate to 1,200 percent, by far the highest ever, according to Reuters.

Turkey’s move effectively kept foreign investors from betting against Turkish assets ahead of local elections that are largely seen as a referendum on President Recep Tayyip Erdogan.

The drama at the Istanbul stock market has not been matched in Europe, where trading has ended with a whimper.

In London, the FTSE 100 just closed 2 points lower at 7194. Germany’s DAX closed flat, while the French CAC shed 0.1%.

The pound is nudging higher tonight, as MPs prepare to hold a series of indicative votes to try to break the Brexit deadlock.

ING Bank have pulled together a handy checklist of some of the options:

It’s been dramatic in Westminster - there’s speculation that the DUP (who have refused to back the PM’s Withdrawal Agreement) will released a statement later.

Plus, speaker John Bercow has made a potentially significant intervention, saying the government can’t hold a third vote on the WA unless it has changed.

The head of Turkey’s banking association has weighed in, denying that domestic banks are deliberately withholding lira from foreign rivals.

Instead, he insists, Turkish banks are keen to get their hands on lira themselves, thanks to the current currency squeeze.

Reuters has the details:

Reports that the Turkish lira’s swap rates are surging due to Turkish banks withholding lira liquidity from foreign banks are not true, the head of Turkey’s banking association told Reuters on Wednesday.

Earlier on Wednesday, sources told Reuters that Turkey would keep directing its banks to withhold lira liquidity from a key foreign market at least until after local elections on Sunday.

In a statement to Reuters, Huseyin Aydin said the reason behind the rise in lira swap rates was that there was not enough lira for foreign banks to buy dollars, and added that Turkey had shown the necessary stance against a speculative attack on the lira.

Aydin said Turkish banks were not sources of liquidity, but rather they were looking for themselves. He said decisions by banks on liquidity were business-based and in line with international laws and regulation.

Newsflash: Turkey’s stock market has suffered its biggest one-day fall since the summer of 2016.

The BIST 100, which tracks Turkey’s 100 largest companies, shed 5,544 points to close at 91,833 points.

This sell-off highlights how investors liquidating stocks to get their hands on lira, given the squeeze on overnight lending rates.

The currency crunch created by Ankara to prop up the lira is intensifying.

The lira overnight swap rate has now jumped again, to 1,200%, says Reuters, double the (already alarming) level seen early this morning.

Marc-André Fongern of MAF Global Forex has a prediction:

International banks have been hurt by President Erdoğan’s clampdown on speculation, says Bloomberg:

Turkey further roiled markets by preventing foreign banks from accessing the liras they need to close out their swap positions. That’s made it almost impossible for bankers to short the lira or exit carry trades, and forced the overnight lira rate up to about 1,000% from 23%.

Some foreign banks were unable to meet their obligations at the close of trading on Tuesday, forcing the central bank to extend hours for transferring funds in Turkey to 9 p.m., according to a senior Turkish official, who spoke on condition of anonymity.

On Wednesday, the Turkish stock and bond markets took the brunt of the hit from the measures meant to protect the lira: banking stocks were down more than 7% and the yield on 10-year lira bonds rose 74 basis points to 18.23%.

As you can see, the Turkish lira has been extremely volatile today, but it’s still stronger against the dollar than on Friday.

Brad Bechtel of investment bank Jefferies blames Turkish president Erdoğan for the currency market panic.

Erdoğan hit the campaign trail last week, ahead of local elections this Sunday.

During his tour, he criticised the US for backing Israel’s claim on the Golan Heights, fuelling concerns of another clash with Washington. He also claimed that speculators were “soaking up foreign currencies from the market and engaging in provocative actions”.

This sort of talk tends to make the markets jittery, says Bechtel:

The US dollar/Turkish lira spot rate had kicked off at the end of the week last week on the back of Erdogan’s thrust back into the limelight as he campaigns for local elections. Anytime he gets back on the mic the currency tends to kick off and we’ve had a 7% round trip the last 3 days in spot.

Expect the currency to remain volatile throughout this election cycle as the market will take the sentiment in the local elections to be a vote of confidence on Erdogan himself. Also the longer he keeps talking the more we are likely to see these extreme moves.

Here’s a good chart showing the surge in the overnight lira swap market:

The Financial Times says Turkey is determined to support the lira, to prevent a repeat of last year’s currency crisis.

Here’s their take on today’s market drama:

The offshore overnight swap rate, the cost to investors of exchanging foreign currency for lira over a set period, soared to 700%, after hitting 325%, the highest level since 2001, in the previous session.

The rising cost highlights what some analysts say is an attempt by Turkey’s government to arrest a decline in the lira, after the currency on Friday faced its heaviest plunge since the economic crisis during the summer of 2018. It rose both on Monday and Tuesday this week, but pulled back by more than 1 per cent as London dealings got under way on Wednesday.

A London-based analyst, who asked not to be named, said on Tuesday that Turkish banks were telling him they had been ordered “not to lend even a single lira to foreign counterparties”.

Ranko Berich of Monex Europe believes Turkey’s efforts to prevent currency speculation may backfire badly:

Bloomberg’s Fercan Yalinkilic points out that Turkish government bonds are also weakening, pushing up the yield (interest rate) on the debt.

That’s another indication that the markets are getting jittery about the impact of Ankara’s speculation crackdown on the economy.

The CBI splits UK retail into 13 subsectors -- five reported falling sales this month, while the rest are flat.

The CBI explains how grocery sales weakened, pulling overall retail sales down.

Grocers have been the biggest positive driver of headline sales growth in the past two months, however sales in the sub-sector were flat on a year ago in March, pulling total retail sales into the red.

The biggest drivers of this month’s fall in sales was ‘other normal goods’, followed by ‘recreational goods’ and ‘hardware & DIY’

This chart shows how March’s UK retail sales were rather weaker than retailers expected (and they’d have known that Easter was late tis year)

Retail suppliers also told the CBI that orders are down this month.

• The volume of orders placed on suppliers fell in the year to March, with a balance of -13%, down from +7% in the year to February. Orders are expected to improve in April (+6%)

European stock markets have dipped this morning, as investors get to gips with the latest pessimistic noises from central bankers.

New Zealand’s surprise move towards an interest rate cut, and Mario Draghi’s less surprising concern about the eurozone economy, has dampened the mood.

The main European stock indices are all in the red, with the FTSE 100 shedding 18 points or 0.25%.

Dean Popplewell of trading firm OANDA explains:

Global equities traded mixed overnight as investors deal with some disappointing economic signals this month, along with a plethora of central banks decisively turning towards accommodation, shying away from rate normalization for the foreseeable future.

A number of sovereign yields have plummeted to new year lows while risk aversion trading strategies have tended to dominate proceedings as U.S/China trade talks (Mar 28/29) remain a focus along with U.Ks Brexit next steps.

U.S recessions fears are being stoked by the inversion of U.S three-month bill rates and the benchmark U.S 10-year note curve.

Not everyone is convinced by Draghi’s claim that the ECB has plenty of tools at its disposal to fight the next downturn.

Sure, it can leave interest rates at record low levels for even longer. It can launch new TLTRO programmes to stimulate bank lending. It could even (I guess) restart its asset purchase scheme programme, or keep delaying the moment when it starts to unwind its existing QE.

But at some stage, maybe it must admit that governments should pick up the baton, and use tax and spending policies more wisely to spur growth....

Rupert Harrison of BlackRock is sceptical....

Economist Tony Yates also believes the ECB’s tools are limited.

Here’s our news story on Sports Direct’s potential bid for Debenhams:

Draghi also offered a crumb of comfort to eurozone banks.

He says the ECB is monitoring the impact of negative interest rates on their profits, and could take measures to help.

Mario Draghi ends his speech by declaring that the ECB has plenty of firepower at its fingertips,

Our monetary policy will remain accommodative and will respond to any changes in the inflation outlook. The effects of exchange rate appreciation have now reversed. Demand should recover, so long as the downside risks to our outlook do not materialise. And with stronger demand, firms should be able to rebuild margins.

But if conditions deteriorate, president Draghi vows to act....

The ECB will adopt all the monetary policy actions that are necessary and proportionate to achieve its objective. We are not short of instruments to deliver on our mandate.

Mario Draghi goes on to warn that the risks to the eurozone economy have risen in recent months, due to problems in the global economy.

He points out that new export orders are still in negative territory, suggesting Eurozone factories are struggling.

But....he hopes that the current “soft patch” will not turn into a serious slump.

The ECB chief tells his audience in Frankfurt that:

All in all, the current data suggest that external demand has not yet spilled over significantly into domestic demand, but the risks have risen in the last months and uncertainty remains high.

This is why our medium-term outlook remains that growth will gradually return to potential, but the risks remain tilted to the downside.

Here’s Laith Khalaf, senior analyst at Hargreaves Lansdown, on the latest twist in the battle for Debenhams:

‘Mike Ashley has clearly decided it’s double rather than quits on Debenhams. The potential 5p offer would be a generous one for shareholders, but it comes with strings attached for Debenhams, in particular appointing Mike Ashley as CEO, and desisting from current plans to refinance the company.

The Debenhams board are bound by their duty to shareholders to give this proposal proper consideration, though it’s not as yet a firm offer for the company. There’s a bit of a chicken and egg situation here too. If Debenhams appoints Mike Ashley as CEO, then there’s little to bind Sports Direct to making a firm offer.

This is not conventional corporate behaviour by any means, but that’s what we’ve come to expect from the Sports Direct CEO. What we haven’t had from either Mike Ashley or Debenhams is a strategic plan for the long term future of the company, and today that still remains sadly lacking.’

Michael Hewson of CMC Markets fears that some Debenhams stores will close, whether Mike Ashley succeeds or fails in seizing control.

The attempts to restructure the business have been going in since the end of Q3 last year, with a tug of war going on between Debenhams management and their largest shareholder, Sports Direct.

While Mike Ashley’s attempts to take over Debenhams can be construed as an attempt to preserve the value of his stake in the business, which isn’t an unreasonable position to take, the fact is if he gets it wrong he’ll end up losing more than his initial stake, which would appear to suggest that Debenhams management reluctance to engage is driven more by personality than in any sense an attempt to safeguard existing shareholder interest.

Whatever the choices the stakes remain high with numerous store closes likely to result, whichever way it goes, which means that the eventual victims in this tug of war will still be the staff on the shop floor.

Boom! Debenhams shares have surged by 80% at the start of trading.

That vertiginous leap sends them back to the giddy heights of.... er.... 4p, compared with 22p a year ago.

So, still below Sports Direct’s proposed offer of 5p -- suggesting City traders aren’t confident Mike Ashley will succeed.

Many analysts believe Mike Ashley’s plan is to merge Debenhams with another UK department store, House of Fraser, which he rescued from administration last year.

Would he be allowed to do it, though? The Competitions and Markets Authority might have issues, as the Evening Standard’s Laura Onita points out.

ITV’s Joel Hills says Sports Direct is trying to avoid losing its 29.9% stake in Debenhams, if its restructuring plan goes through:

In the statement Sports Direct said shareholders are “sick and tired of being ignored, cast aside and trampled underfoot by the lenders of Debenhams.”

The statement accused the board of Debenhams of “incompetence, or worse collusion” - conspiring with lenders to cook-up a plan to take shareholders out.

Chris Wootton, Deputy CFO of Sports Direct said, “we will leave no stone unturned in pursuing those responsible for this long planned theft”.

It’s strong stuff but sounds a little like a howl of defeat.

Even if Ashley were to succeed in hoovering up all of Debenhams shares, he’s not proposing to pay-off the company’s lenders.

Their debt (in the form of bonds and loans) gives them significant power.

They could push the company into administration if Ashley seizes control.

Either way he gets wiped out.

Kiwibank senior economist Jeremy Couchman says he now expects New Zealand to slash interest rates in May, and again in August.

That’s quite a change - previously Couchman (like most economists) had expected borrowing costs to remain unchanged for some time.

Here’s the moment when the New Zealand dollar plunged, after the Reserve Bank announced it would probably cut interest rates soon: