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Business

Turmoil in Turkey sends U.S. and European stocks sharply lower

Trader Peter Tuchman works on the floor of

Trader Peter Tuchman works on the floor of the NYSE on Thursday. Photo Credit: AP / Richard Drew

Stocks in the United States and Europe skidded Friday as investors worried about the financial stability of Turkey and how it might affect the global banking system.

Turkish President Recep Tayyip Erdogan has accumulated more and more control over the country's central bank as well as its financial system, which is now run by his son-in-law. Its currency is plunging and Turkey is also in a diplomatic spat with the U.S., a major trading partner.

Alex Dryden, global markets strategist for JPMorgan Asset Management, said Erdogan showed no signs of changing course Friday, and investors are losing hope that Turkey's government has the knowledge or independence needed to deal with the country's financial problems.

"There was some hope that maybe they'd step back from the brink and you'd see a re-establishment of central bank independence," he said.

While Dryden and other analysts say Turkey's problems aren't a major risk to the financial system, investors didn't wait to find out Friday.

They sold stocks and bought U.S. dollars and government bonds. The bond purchases sent interest rates lower, which hurt banks. The dollar got stronger, partly because the Turkish lira nosedived.

The S&P 500 slid 0.7 percent, to 2,833.28, its worst loss in a month. The Dow Jones Industrial Average dropped 196.09 points, or 0.8 percent, to 25,313.14. The Nasdaq composite sank 0.7 percent, to 7,839.11. -- AP

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