Wednesday July 1, 03:38 PM
UPDATE 1-Turkish markets strengthen, eyes on inflation
ISTANBUL, July 1 (Reuters) - Turkish financial markets strengthened modestly on Wednesday, as traders shifted attention to inflation data, expected to guide the bond market's moves.
The Turkish Statistics Institute will announce June inflation on 1400 GMT on Friday. A Reuters poll showed the consumer price index (CPI (NYSE: CPY - news) ) was seen climbing 0.11 percent month-on-month in June.
The Istanbul Chamber of Commerce data showed on Wednesday that retail prices in Turkey's largest city fell 1.67 percent month-on-month in June, backing expectations of falling inflation.
The yield on the benchmark Feb. 2, 2011, bond fell further to 11.89 percent from its one-and-a-half month low of 11.92 percent.
'Inflation data will be very important for the trend in Treasury bond yields ... The yield could tilt towards 11.5 percent depending on the inflation data and global markets of course,' said Levent Guven, trader in TEB.
Continuing inflation could encourage the Central Bank (CBSU.PK - news) to continue its easing trend. It has reduced interest rates by 800 basis points since November.
The lira, which has held steady against the dollar this year, firmed slightly to end 1.525 from 1.528 on Tuesday.
'The 1.520-1.525 level is very resilient. The lira opened at 1.54 against the dollar in the morning but when (South Africa's rand) climbed, we think that all EMEA currencies adjusted,' said ING Bank analyst Hasan Sener.
The main Istanbul share index ended 0.8 percent higher at 37,245.86, gaining for a six straight day to a fresh 2009 high. The share index underperformed the MSCI index of emerging market stocks, which rose 1.67 percent.
In a new sign of Turkey's economic downturn, unofficial data on Wednesday showed that exports fell 32.8 percent in June to $8.12 billion. That followed data on Tuesday that showed the economy contracted 13.8 percent in the first quarter, its deepest contraction recorded in history.
'This is the lowest June export figure for the last three years ... The sharp contraction in the world economy and the more acute contraction in Turkey's export markets are the main factors behind the bleak picture in export performance,' said HSBC (LSE: HSBA.L - news) strategist Fatih Keresteci.
Improved global market sentiment, along with IMF deal hopes, have helped drive a rally of some 65 percent in Turkish stocks since a 2009 low in mid-March.
Prime Minister Tayyip Erdogan said last week that International Monetary Fund and Turkish officials would meet in the next few weeks to come to a final decision on a loan deal expected to be worth as much as $45 billion to help Ankara weather the economic crisis.
Among shares in focus, flag carrier Turkish Airlines rose 3.02 percent to 2.39 lira, extending gains driven by expectations of positive traffic figures.
(Reporting by Selcuk Gokoluk and Daren Butler; Editing by Andy Bruce) Keywords: MARKETS TURKEY/
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