Mon, Nov 16, 2015 - Page 15 News List

Markets to see brief hit after attacks

RISKY STOCKS:The high-profile attacks in Paris are likely to have a lasting negative impact only on the stocks of firms operating in the nation’s large tourism industry

Reuters, SYDNEY AND TOKYO

A man reads a newspaper with headlines of the Paris attacks in Manila, the Philippines, yesterday.

Photo: AFP

Global stocks are set for a short-term sell-off today after militants launched coordinated attacks across Paris that killed 129 people, but analysts said a prolonged economic impact or market reaction was unlikely.

French President Francois Hollande has declared a state of emergency, ordering police and troops into the streets, and set three days of official mourning after the attacks he called an “act of war” by the Islamic State.

The carnage prompted condemnation by world leaders and outpourings of support for Parisians from around the globe, but would likely have only a knee-jerk impact on investment decisions, said Shane Oliver, chief economist at Australia’s AMP Capital in Sydney.

“History is to tell us that if the economic impact is limited — and I think it would be — that markets would quickly recover and go on to focus on other things,” Oliver, who is also head of strategy at the A$156 billion (US$111 billion) wealth management firm.

While news of the attacks hit after markets closed on Friday, S&P 500 Index futures were still trading and shed about 1 percent in light volume.

“If this had happened during market trading hours there could have been a panic, but markets had a weekend to digest all the information,” said Eiji Kinouchi, chief technical analyst at Daiwa Securities in Tokyo.

With Wall Street closing more than 1 percent lower after weak US retail sales figures, Asian and European share markets would have been expected to fall even without the Paris attacks.

French stocks, particularly those exposed to the nation’s large tourism sector, are likely to suffer the biggest falls.

“These Paris terrorist attacks and the larger scale of this attack could have a meaningful negative impact on the travel and tourism sector,” said Robert T. Lutts, president and chief investment officer at Cabot Wealth Management in Salem, Massachusetts.

France has the largest number of tourists in the world and the sector accounts for about 7.5 percent of GDP.

“Given that France has a big tourism industry there might be some damage to the economy if this leads to a fall in visitors to France, or in tourism in general after the crash of a Russian plane,” SMBC Nikko Securities financial market and fiscal analyst Hidenori Suezawa said.

“I do not expect this impact to go so far as to affect the [US Federal Reserve’s] monetary policy though at this point.”

Europe has suffered similar coordinated attacks on public transport systems previously, in Madrid in 2004 and London in 2005. Almost 250 people were killed and more than 2,500 injured in those bombings on trains and buses by al-Qaeda-inspired militants.

“The knee-jerk reaction in other terrorist attacks over the last decade has been a rush to safety, including aggressive buying in the US Treasury markets,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC in Philadelphia.

“I sincerely hope these attacks would prove short in duration and would abate in intensity, in which case the market reaction is likely to only include a brief safety bid in Treasuries,” LeBas said.

US 10-year Treasuries notes yielded 2.273 percent at Friday’s close. The euro ended the week little changed at US$1.0777 and is down 11 percent this year against a resurgent greenback.

French financial markets are to open as usual today, stock and derivatives exchange Euronext said on Saturday.

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