A slew of unnerving headlines this week from the United Kingdom, Russia, and Turkey culminated in a wild Friday for global markets.
Turkey was front and center of the chaos on Friday, with its currency plunging to a record low against the US dollar. A diplomatic tussle between the US and its NATO ally deepened after President Donald Trump said he had authorized the doubling of tariffs on Turkish steel and aluminum.
The turmoil in Turkey raised fears over what it meant for the eurozone, sparking a sell-off in bank stocks and other assets in the region.
"The plunge in the lira, which began in May, now looks certain to push the Turkish economy into recession,
and it may well trigger a banking crisis," Andrew Kenningham, the chief global economist at Capital Economics, said in a note on Friday.
These fears spilled over into US markets, with investors shifting their focus away from strong corporate earnings to what was happening across the Atlantic. The Dow Jones industrial average fell 0.7%, or 185 points, losing as many as 280 points during the trading session. The S&P 500 fell 19 points, or 0.68%. The tech-heavy Nasdaq composite broke an eight-day winning streak and ended down 0.8%, or 56 points.
Here is what you need to know.
At its worst level this week, the Turkish lira lost nearly a quarter of its value against the dollar.
Ankara and Washington have been at odds over the detention of the American evangelical pastor Andrew Brunson on terrorism charges, a matter that Trump has discussed directly with Turkish President Recep Tayyip Erdogan over the phone, The New York Times reported.
The US on August 1 imposed financial sanctions on its NATO ally, blocking Turkey's ministers of justice and interior from doing business with Americans.
The diplomatic tension and the failure of Turkish officials to persuade the US to lift the sanctions plunged the lira to new lows this week. The currency's slide deepened early Friday, after the Financial Times reported that the eurozone's chief financial watchdog was concerned about how some of Europe's biggest lenders would be affected by a crisis in Turkey.
The lira stumbled even more as Erdogan delivered a wild speech to supporters about the plunging currency, encouraging Turks to buy it up.
"Don't forget," he said, "if they have their dollars, we have our people, our God."
The final gut punch to the lira came after Erdogan's speech, when Trump tweeted that he had "just authorized a doubling of tariffs on steel and aluminum with respect to Turkey."
More evidence of how nervous investors are about Turkey's economy could be seen in the iShares MSCI Turkey exchange-traded fund, which plunged 18% and saw the most premarket trades ever, according to Bloomberg.
The pound also nosedived this week. And like with the lira, investors found new reasons on Friday to dump the currency.
Its sell-off was based on rising fears that Britain would leave the European Union without a deal, with less than eight months to go before the planned exit date.
"The possibility of a no-deal at the moment is uncomfortably high," Bank of England Governor Mark Carney said during a radio interview last week.
A stronger dollar has also put more pressure on the currency. The dollar index, which measures its strength against a basket of other developed-nation peers, hit its highest level since June 2017 on Friday.
Investors were already grappling with what a no-deal Brexit would mean for the continent. According to Barclays, they have pulled $51 billion from European funds since early March, wiping out the inflows of 2017.
On Friday, they also had to also factor in Turkey's economic crisis.
The announcement intensified fears that US sanctions on Russia may not recede anytime soon. The ruble has lost 17% of its value against the dollar this year.
Russia struck back Friday, with Prime Minister Dmitry Medvedev saying that any move to rein in Russian banks or their foreign-currency dealings would be "economic war."
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