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Toronto and U.S. stock markets are set for a strong bounce Tuesday after the Turkish lira recovered and eased worries about that country’s economic crisis.

After three weeks of losses, Turkey’s lira finally recovered as the country’s central bank moved to ease pressure on the currency, triggering a 7-per-cent surge to 6.4 per U.S. dollar . It still lost almost 10 per cent on Monday alone and has shed more than two-fifths of its value so far in 2018.

The rot also stopped for the South African rand, the Russian rouble and the Argentine peso. Argentina’s central bank unexpectedly raised interest rates by 5 percentage points on Monday. Even so, the peso hit a record low.

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“These things get very volatile in both directions once you have had a really big move,” Saxo bank’s head of FX strategy John Hardy said. “To suggest this thing is over, you would have to see that Turkey is isolated. I’m not there yet and I don’t think the market is there.”

European shares also bounced back after two days of selling as anxieties over contagion from the Turkish currency crisis eased. Britain’s FTSE slipped 0.02 per cent, Germany’s DAX rose 0.24 per cent, and France’s CAC gained 0.27 per cent.

In Asia, Hong Kong stocks fell for a third straight session on Tuesday, after data showed further signs of cooling in China’s economy and as trade war worries lingered. The Hang Seng index fell 0.7 per cent to 27,752.93 points, while the China Enterprises Index lost 0.2 per cent to 10,744.31 points.

However, the Nikkei rose 2.28 per cent. Japan’s Nikkei on Tuesday rebounded from a five-week low, posting its biggest one-day gain since March as export-driven firms benefited from a pause in the safe-haven yen’s strengthening while the battered Turkish lira firmed.

China’s economy is showing signs of cooling further as the U.S. prepares even tougher trade tariffs, with investment growth slowing to a record low and consumers turning more cautious about spending, data showed on Tuesday.

Commodities

Oil prices rose on Tuesday after Saudi Arabia said it had cut production in July, though concerns over a slowdown in global economic growth kept a lid on markets.

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Saudi Arabia told the Organization of the Petroleum Exporting Countries that it had reduced crude output by 200,000 barrels per day (bpd) to 10.29 million bpd in July.

OPEC itself, using secondary sources, estimated in a report published on Monday that Saudi production was at a slightly higher level of 10.39 million bpd last month. But both figures suggest the kingdom, de facto leader of OPEC, is keen to avoid a repeat of a global glut that has depressed prices over the past few years.

“We do not think that Saudi Arabia is interested in seeing Brent crude below $70 a barrel,” said SEB commodities analyst Bjarne Schieldrop.

Saudi Arabia is OPEC’s biggest producer and the only major exporter that can easily adjust output to balance global supply.

Gold prices steadied near 18-month lows on Tuesday, attempting a break back above the key US$1,200 level as the dollar eased and analysts said the precious metal could have fallen too far.

The dollar, in which commodities such as gold are priced, edged lower against a basket of its peers as the Turkish lira regained its footing, easing concerns of a negative ripple effect on global markets.

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“A lot of investors got very disappointed because they thought that gold would be the safe haven in trade conflict and also with Turkey and emerging markets and it wasn’t,” said Georgette Boelle, commodity strategist at ABN AMRO.

“It’s still very difficult to point out where the low is going to be but we are in cheap territory and gold should start bottoming out at these levels.”

Gold, which is down about 8 per cent this year, has faced a slate of headwinds in 2018 including rising U.S. interest rates, a soaring dollar and failure to capitalize on its traditional role as a hedge against risk amid global uncertainty.

Spot platinum rose 0.3 per cent to US$800.50, after dropping 3.6 per cent to a three-week low at US$791.50 on Monday. Silver rose from an over 13-month low of US$14.94 in the previous session. On Tuesday it was up 0.6 per cent at US$15. Palladium rose 0.2 per cent to US$892.20.

Currencies and bonds

The Canadian dollar rebounded Tuesday and was trading close to the 76.5 US cent mark as oil and gold prices gained.

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The U.S. dollar was headed for its biggest daily decline this month and versus a basket of major currencies was down 0.2 per cent at 96.230. It had rallied since the Turkish lira crisis erupted last week.

But “until the crisis in Turkey is over or the market considers it to be an isolated problem, risk aversion is likely to remain elevated which will continue to benefit mainly the currency safe havens,” said Antje Praefcke, a currency strategist at Commerzbank in Frankfurt.

The euro recovered on Tuesday from earlier losses linked to the collapse of the Turkish lira, but investors said the exposure of European banks to Turkey would continue to hound the single currency.

The euro traded up 0.1 per cent on Tuesday at US$1.1420 , having fallen to a 13-month low of US$1.1365 on Monday. So far this month it has lost 2.4 per cent.

“The euro’s fall on worries about European banks’ exposure to Turkey seems a bit overdone, considering that their scale is not that huge,” said Yukio Ishizuki, a senior strategist at Daiwa Securities.

Stocks to watch

Canadian oilfield services provider Ensign Energy Services Inc. on Monday said it would make a $947-million bid for Trinidad Drilling Ltd., as the recovery of Canada’s oil industry lags a global rebound.

Cannabis companies could see some action on the markets Tuesday after the Ontario government announced late Monday that it will allow the private sector to sell recreational cannabis by April while also handing municipalities the power to veto stores from opening, a move that could create an up to six-month delay before consumers can purchase the newly legal products in person.

Callidus Capital Corp.'s Newton Glassman is stepping aside as chief executive officer to take a medical leave due to a severe lower back condition, the lending company said on Monday as it reported a deeper second-quarter loss. Mr. Glassman’s medical leave comes after he missed Callidus’s annual meeting in July due to health reasons. The company, the publicly traded arm of the Toronto-based financier’s Catalyst Capital Group Inc., said his duties will be taken up by the rest of the management team.

Home Capital Group Inc. says it earned nearly $30 million in its most recent quarter, but fell just short of analyst estimates. The Toronto-based mortgage lender’s net income for the second quarter of its 2018 financial year was $29.6 million compared to a $111.1 million loss in the same quarter the previous year.

Home Depot Inc. on Tuesday reported second-quarter sales that beat Wall Street estimates and revised its earnings forecast for the year, boosted by a rebound in demand for seasonal merchandise and as more shoppers made purchases. Shares of the No. 1 U.S. home improvement chain, up 25 per cent in the past 12 months, rose 2 per cent to US$198. in premarket trading.

Advance Auto Parts jumped 5.9 per cent after beating quarterly profit estimates and the auto parts retailer announced a share buyback program.

Earnings include: Africa Oil Corp.; Agellan Commercial REIT; Birchcliff Energy Ltd.; CAE Inc.; Canopy Growth Corp.; Cronos Group Inc.; Element Fleet Management Corp.; Enercare Inc.; Fennec Pharmaceuticals Inc.; Great Canadian Gaming Corp.; Guardian Capital Group Ltd.; Home Depot Inc.; Hydro One Ltd.; InterRent REIT; Intertain Group Ltd.; Invesque Inc.; Leagold Mining Corp.; Magellan Aerospace Corp.; Melcor Developments Ltd.; Neptune Technologies & Bioressources Inc.; Park Lawn Corp.; ProMetic Life Sciences Inc.; Timbercreek Financial Corp.; Wheaton Precious Metals Corp.;

Economic news

(8:30 a.m. ET) U.S. import price index for July. The Street expects an increase of 0.1 per cent from July.

With files from Reuters

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