Turkey Looks Set for Run-Off in Presidential Elections

There's the prospect of a second round for Turkey's presidential election.

This morning the Turkish electorate is waking up to the prospect of a second round for their country’s presidential election after neither the incumbent Tayyip Erdogan or rival Kemal Kilicdaroglu have secured the necessary 50% threshold. With almost all the votes counted, Turkey’s Supreme Election Council have announced that Erdogan has secured 49.49% of the popular vote, while Kemal Kilicdaroglu has 44.79%, thus raising the likelihood that the election will go to a run off in two weeks’ time. This comes as Erdogan’s AK party looks as though it will secure a simple majority in the Turkish Parliament having won 323 seats out of 600.

The elections come against a backdrop of increasing political and socio-economic polarisation in Turkey. Since becoming prime minister in 2003, Erdogan has successively consolidated power and in 2017 (three years after becoming President) abolished the office of the Prime Minister – further increasing his grip on power following a failed coup d’état. The elections also come as Turkey faces inflation above 40% with Erdogan’s party rejecting conventional monetary policy, having loosened their monetary policy despite soaring inflation.

The Turkish lira is now trading close to record lows against the dollar with political uncertainty weighing on investor sentiment. According to some reports, the Turkish state bank may be intervening to artificially support the lira and there are concerns that uncertainty over the next two weeks could further lead to pressure on the lira.

EU and G7 to Ban Russian Gas Imports

As world leaders gear up for the G7 meeting in Japan later this week, the EU and G7 have agreed to ban Russian gas imports which pass through counties where the Kremlin have cut off. This marks the first time that gas trade has been blocked by the west since the full-scale Russian invasion of Ukraine last February. It is hoped that this will apply further economic pressure on Moscow, given that gas exports account for a major source of the Kremlin’s total tax receipts (about 1/3rd before the Russo-Ukrainian War).

TTF gas futures – the European benchmark – have continued to retreat this month and are now trading just above 32 EUR/MWh having sunk over 6% last week. This marks a 65% fall on an annualised basis and follows a tumultuous year in the gas markets which saw TTF gas futures rise to over 330 EUR/MWh.

Gas storage continues to remain high relative to the time of year and is currently at around 60% across the EU as LNG imports from the US continue to rise. Gas storage is currently well in excess of the five-year average of 34% and comes as the EU has set another target to have storage at 90% capacity before the 1st November. Accordingly, the EU look as though they are in a strong position to place further bans on imports, with the prospect of supply-side cuts failing to lift TTF prices.

Thai Elections

It’s all change at the top of Thai politics too, after an election this weekend. Voters turned out to support the Move Forward Party and shunned the pro-king, pro-military establishment. The MFP took 38% of the vote with another opposition party taking 29% of the votes. The parties are up for working together in coalition but even if they agree on terms it is still not completely clear that the incumbent military backed government will allow a transition of power. The BBC has the details: Thailand elections: Voters deliver stunning win for reform – BBC News

Looking Ahead

This morning is a little light on primary data releases, though markets will be paying attention to speeches from the Fed’s Bostic, Kashkari and Cook. These speeches follow the Fed’s Bullard who maintained there is a prospect of continued disinflation and that the fed’s monetary policy may be sufficiently restrictive. Today’s speeches comes ahead of UK labour data tomorrow where unemployment is expected to remain unchanged at 3.8%. This will be followed by Eurozone GDP and US retail sales.