Paris - While nobody can predict how deeply investors will react to attacks that killed scores of people in Paris Friday, the history of terror incidents around the world over the last 15 years shows market reactions are often sharp and, increasingly, short-lived.
The murder of more than 130 people in a coordinated plot linked to Islamist radicals occurred at a fraught time for global stocks, thrusting geopolitical anxiety to the top of a list of concerns that caused volatility to surge in recent months. France’s CAC 40 Index is already down almost 9 percent since April and may fall further when exchanges open Monday, should trading mirror past patterns.
“Wouldn’t be surprised to see markets down 2 percent to 3 percent, maybe even more,” said Yogi Dewan, the chief executive officer of Hassium Asset Management in Gerrards Cross, UK. His firm manages about $1 billion.
At the same time, disentangling the reaction to Friday’s events from the recent downward trend in equities will be impossible, and failing to do so could understate the resilience of countries faced with threats and their resolve in combating them. The French stock exchange is planning no alteration to its schedule, Caroline Nico, a spokeswoman for Euronext, said Saturday in an e-mail.
“People will want to stand together and say we’re going to act as normal as possible,” said Matt Maley, an equity strategist at Miller Tabak & Co in New York. “It’s going to affect what people do in France and throughout Europe, but the markets are still going to be open on Monday morning.”
The euro weakened 0.5 percent and US equity index futures slid in early Asian trading Monday, while havens from gold to Treasuries and the yen rallied.
Here’s a look at how past terror incidents affected markets.
September 11, 2001: New York
US markets shut down after the 9/11 attacks that killed almost 3 000 people and brought down the World Trade Center’s twin towers. When equity trading resumed the following week, the Standard & Poor’s 500 Index slumped 12 percent in five days, the most since the aftermath of the October 1987 crash. By October 11, it had recovered its losses.
Gains in Brent crude, up 5.5 percent the day of the attacks, were erased within a week. Yields on 10-year Treasuries fell, reaching a low in early November, before recovering their pre-attack levels later that month. The dollar, which tumbled the most since 1998 on September 17, had wiped off declines by the following month.
October 12, 2002: Bali
The benchmark gauge for Indonesian equities sank 10 percent, and the rupiah fell with the nation’s bonds after bombings in a Bali nightclub killed more than 200 people. By November, the Jakarta Stock Price Index had erased the slide. It ended the year up 8.4 percent.
March 11, 2004: Madrid
Bombings in commuter trains killed 191 people. That day, Spain’s benchmark IBEX 35 Index fell 2.2 percent, the most since the previous November. It dropped through March 15, when it reached its lowest level of the year, before rebounding to its pre-bombings level by the beginning of April.
July 7, 2005: London
The benchmark FTSE 100 Index fell 1.4 percent, the most in almost a year, as bombs killed more than 50 people in subway attacks. The gauge recovered the next day. The yield on 10-year gilts slipped eight basis points before rebounding the next five days. The pound, which weakened 0.7 percent against the euro, continued its decline before recovering the following month.
On Sunday, Dubai’s DFM General Index dropped 3.7 percent, the most in almost three months.
With respect to Paris, “People have had the whole weekend to digest and think through the news, which tends to subdue potential ‘surprise effect’ moves,” said Kay Van Petersen, strategist at Saxo Capital Markets in Singapore. “The markets also have a very adaptable habit of adjusting to repeated events, with less and less impact being seen over time.”