Shares in Istanbul climb to record high after Europe deal

ISTANBUL – Turkish shares climbed to a record high while bonds and the lira were firm yesterday after European Union leaders and Turkey agreed to the terms on which Ankara will start membership talks with the bloc next October. Brokers said the deal heightened the chances of a cut in Turkish interest rates by the end of the year. The ISE National-100 index closed up 1.78 percent at 24,360.63, the latest of a series of highs, on news of the deal which followed tough negotiations. The EU insisted Turkey must move toward normalizing relations with Cyprus. Shares have risen steadily in recent weeks in anticipation of an EU deal and brokers said they did not anticipate further major gains as the accord had been broadly expected. «I don’t expect the latest news from the EU to have an intense effect on markets, because the markets were already expecting a positive result and had already priced in today’s agreement,» said Disbank’s Guldal Secener. Yields on the new benchmark July 5, 2006 bonds closed at 22.80 percent, up from 22.36 percent on Thursday. However, in Monday value-dated trade, it stood at 22.21 percent. The lira dipped below the 1,400,000 level against the dollar in Monday value-dated trade after closing at 1,404,000 on the interbank market, compared with a previous close of 1,403,500. «The currency market has had a good rally in recent months, but there may be scope for more upward momentum. The market will now start to look at whether there will be an interest rate cut. The stage is now set for a 200 basis cut by year-end,» said Debbie Orgill, emerging markets analyst at ABN Amro. Separately, Standard & Poor’s affirmed Turkey’s «BB-» long-term foreign currency and «BB» long-term local currency sovereign credit ratings. S&P also affirmed Turkey’s «B» short-term foreign and local currency ratings and «stable» outlook.