Turkey Stocks, Bonds Rise to Two-Month Highs on Merkel Backing

Turkish stocks were poised for the highest close in two months and bonds advanced after German Chancellor Angela Merkel argued in favor for extending billions of euros to Turkey to help cope with an influx of Syrian refugees.

The Borsa Istanbul 100 Index gained as much as 1.8 percent, the most in almost two weeks, after Merkel praised Turkey’s willingness to work with Europe in tackling the region’s refugee crisis following a meeting with President Recep Tayyip Erdogan on Sunday. Tupras Turkiye Petrol Rafineleri, Turkey’s sole oil refiner, was the biggest contributor to the advance. The government’s 10-year bond increased, with the yield falling as low as 10.04 percent, the weakest since August on a closing basis. The lira retreated.

Financial support from the European Union would help Turkey as it tries to accommodate refugees at a time when the country is preparing for its second election in six months and grappling with an economy showing the slowest growth in three years. While Turkey posted the smallest current-account deficit since 2009, its finances are under pressure from an influx of more than 2 million people from the civil war in neighboring Syria in the past four years.

“Additional foreign currency flow will help finance the current account deficit, which has already narrowed significantly in August,” Mehmet Gerz, the chief investment officer at Ata Portfolio in Istanbul, said by e-mail. “Merkel’s visit this weekend also raised optimism for Turkey-EU relations in 2016.”

The Borsa 100 traded 1.6 percent higher at 79,734.54 at close in Istanbul. The lira fell 0.5 percent to 2.9052 against the dollar after gaining as much as 0.4 percent earlier. The yield on the government’s 10-year debt dropped eight basis points to 10.08 percent, lowest since August 17.

EU Aid

Merkel offered her support as the nation demands visa liberalization and advances in its EU accession talks. The EU has provisionally agreed to provide 3 billion euros ($3.4 billion) of aid to Turkey in return for help in stemming the flow of refugees from the Middle East, Maltese Prime Minister Joseph Muscat said.

With more than a million migrants set to reach the EU this year, and more expected as a result of Russian bombing raids in Syria, Turkey is the focus of efforts to stem the wave of refugees.

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