The failed coup attempt in Turkey has fueled a sharp conflict with Washington over the fate of a Turkish cleric in the U.S., while posing a broader challenge to the West’s efforts to fight terror and promote liberal democracy.
Senior Turkish government officials are pressing the Obama administration to extradite cleric Fethullah Gulen, whom they blame for orchestrating the attempted coup. The gap between the two allies’ agendas became clear Sunday, when U.S. officials responded to Ankara’s demands that he be handed over by spelling out the legal procedures and evidence hurdles involved in that process.
Turkey coup impact limited but instability fear remains
Turkey's failed military coup may prompt some flight to safe-haven assets on Monday but there will only be a more serious longer-term impact for investors if instability persists in the strategically important emerging market.
Strategists and economists said on Sunday the fact that the coup, launched while US markets were still trading on Friday, had been put down would limit its impact on developed markets.
However, investors would be concerned at how the aftermath of the plot plays out in a country seen as a key player in the Syrian crisis and in efforts to control the flow of migrants into Europe.
Turkey's government said on Sunday it was in full control of the country and economy. The authorities rounded up nearly 3,000 suspected military plotters and the same number of judges and prosecutors after forces loyal to President Tayyip Erdogan crushed the coup, in which at least 290 people were killed.
"I would not expect a major impact, the way we saw a rush to safe assets after Brexit, but there will be questions raised about Turkey's role," said Keith Wade, chief economist at asset management company Schroders.
"If it did become unstable, it would become a concern for investors because clearly it plays a critical role in the Syrian crisis," Wade said.
GEOPOLITICAL NOISE
Ian Gunner, portfolio manager at the Altana Hard Currency Fund, expected no major reaction in developed markets on Monday. The failed coup was likely to be seen as "just more geopolitical noise, and we are getting lots of it at the moment".
However, markets would closely follow the Turkish government's response to the coup for any implications for Turkey's chances of joining the European Union.
Markets have shown little and very short-lived reaction to a series of terrorist attacks in Europe in recent months, viewing them as one-off events with limited economic consequences.
"There is an initial impact and you do get these flights to safety but it does wear off very quickly," said Neil Mellor, currency strategist at Bank of New York Mellon in London.
Reference : Market Watch, Trade Arabia
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