Turkish markets surrender gains made after Erdogan poll win

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Turkish markets surrendered early gains on Monday as concerns over the direction of economic and monetary policy weighed on sentiment after President Tayyip Erdogan and his AK Party won presidential and parliamentary elections.

Erdogan emerged triumphant overnight from his biggest electoral challenge in 15 years, giving him the sweeping executive powers he has long sought and extending his grip on the nation of 81 million until at least 2023.

The lira weakened slightly to 4.6695 against the dollar by 1006 GMT with volatile trade from Friday’s close of 4.6625. It had firmed to as much as 4.5375 in early trade.

“In the short term, markets may be relieved that a period of political instability has been avoided,” said Jason Tuvey, senior emerging markets economist at Capital Economics.

“But any rally could quickly go into reverse if President Erdogan uses his strengthened position to pursue looser fiscal and monetary policy, as we fear is likely.”

The main BIST 100 stock index was flat at 95,818 points, having opened more than 3.5 percent higher. The 10-year benchmark bond yield rose to 16.38 percent from Friday’s close of 16.29 percent, while the two-year yield fell to 18.98 percent from 19.18 percent.

Turkey’s dollar-denominated bonds maturing 2022 and beyond gained, with the 2040 issue chalking up its biggest daily gains since 2013.

Erdogan took 52.6 percent of the vote in the presidential race, with almost all votes counted. His AK Party took 42.5 percent in the parliamentary election and its nationalist allies beat expectations with 11.1 percent, giving their alliance a legislative majority.

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