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The Deal: European, Asian Shares Rise as Turkey Hikes Interest Rates

LONDON (The Deal) -- European and Asian markets were in recovery mode Wednesday after the Turkish central bank last night more than doubled its main interest rate to stabilize the tumbling lira, and helped stabilize other emerging market currencies in the process.

The central bank raised its weekly repurchase rate from 4.5% to 10%, and increased the top rate from 7.75% to 12%, defying the wishes of Prime Minister Recep Tayyip Erdogan. The move followed a surprise interest rate rise in another key emerging market, India, the previous day and gave investors some hope that the panic outflows from key markets into haven currencies and commodities like the Yen or gold might subside.
 
But here's the thing. The sugar high from eating Turkish Delight doesn't last too long, and by mid-morning London time not only the lira, but also other emerging market currencies like the South African rand had begun to fall back. There's also still that nagging worry that the Federal Reserve on Wednesday announce something other than the widely expected $10 billion taper reduction in its monthly bond-buying. Global stock markets followed the currencies down.
 
That said, the key European markets were still up compared with Tuesday's close. London's FTSE 100 was up 0.75% at 6622 and in Paris the CAC40 (which had been up 1% in early trading), was still up 0.47% at 4205. Frankfurt's DAX index was up 0.89% at 9490.75.
 
In London, supermarket chain J. Sainsbury was the biggest faller, down 1.88% to 350 pence on the not-unexpected news that CEO Justin King has decided to step down in July after a highly successful 10 years in the post. Interestingly, he's chosen to waive a $2.9 million severance cash payout, maybe because the last quarter has been tough for the U.K. supermarket sector in general and Sainsbury's has been no exception. Sainsbury this month reported its slowest growth in nine years over the crucial Christmas trading period and downgraded its forecast of sales expansion for the full year. King will be replaced by group commercial director Mike Coupe.
 
But mining stocks were up this morning, after strong numbers fourth quarter numbers from Anglo-American for 2013 for most of its operations and especially a 25% increase in iron-ore production compared with Q4 2012, after the strikes that damaged its output and image in that year.
 
In Japan, meanwhile, the strengthening emerging market currencies led to a relative weakening of the yen, which in turn boosted the export stocks on its Nikkei 225 index. The Tokyo market closed up 2.7% at 15,383.91. In Hong Kong, billionaire Li Ka-shing's utility company Hong Kong Electric sank on its flotation this morning after pricing at HK$5.45 the bottom of its bookbuilding range. The stock closed at HK$5.34. However, the Hang Seng index was up 0.82% at 22,141.61.

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