Paris - Stocks fell around the world and the euro slipped as investors responded to Europe’s worst terror attack in a decade by trimming positions in riskier assets. Demand for havens boosted gold and government bonds.
The Stoxx Europe 600 Index dropped to a three-week low and Europe’s common currency weakened 0.2 percent as the violence in Paris on Friday sparked concern that geopolitical tensions will hurt trade and consumer confidence. Chinese shares in Hong Kong led losses in Asian equity markets after authorities restricted the use of borrowed money to buy shares, while U.S. index futures slipped. Gold advanced the most in a month and Treasuries climbed for a fifth day. Oil halted two weeks of losses as France dispatched warplanes to bomb Islamic State’s stronghold in Syria.
The attacks on Paris came at a fraught time for global markets. Key economic reports from Japan, the European Union and China trailed estimates over the past week, while traders have maintained bets that the Federal Reserve will increase interest rates in December. Bulls may find some solace in the history of terror incidents around the world over the last 15 years, which shows market reactions have become increasingly short-lived.
“The market was in a fragile state before the attack, and the damage to investor sentiment is showing,” Nader Naeimi, the Sydney-based head of dynamic asset allocation at AMP Capital Investors, which oversees about $112 billion, said in an interview on Bloomberg Television. “Having said that, we are in a world that’s getting increasingly used to acts of terror. This time, the reaction is likely to be just short term.”
Islamic State, which has also claimed responsibility for blasts in Beirut and the downing of a Russian passenger jet in Egypt, is urging people based in Belgium “to act on French territory and in other European cities,” France’s interior minister said. While the nation’s stock exchange opened as usual on Monday, Europe is on high alert after at least 129 people were killed in more than half a dozen locations in the French capital. Ten of the country’s fighter jets struck targets Sunday evening in Syria, hitting a command base, according to the Defense Ministry.
Stocks
The Stoxx 600 dropped 0.8 percent at 8:02 a.m. London time, led by tourism-related companies and retailers. France’s CAC 40 Index declined 1.2 percent. Standard & Poor’s 500 Index futures retreated 0.2 percent.
“The latest attack may delay the European economic recovery,” said Peerapong Jirasevijinda, the chief investment officer at Bangkok-based BBL Asset Management, which oversees about $17 billion. “It will hit the tourism sector.”
The MSCI Asia Pacific Index lost 1.1 percent, with the Hang Seng China Enterprises Index sliding 2 percent after the country’s two main exchanges doubled margin requirements. Japan’s Topix dropped 0.9 percent after data showing gross domestic product shrank a deeper-than-projected 0.8 percent in the third quarter. Mazda Motor Corp., which gets 20 percent of its revenue from Europe, retreated 2.4 percent. Shares of airline operators across Asia tumbled.
Currencies
The euro dropped toward a six-month low versus the dollar, nearly erasing its first weekly gain in a month. South Korea’s won slid 0.9 percent, while Japan’s yen swung between gains and losses.
“The euro is under pressure as markets see recent events as destabilizing, and increase the uncertainty over the European economic outlook,” said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand in Auckland.
The yuan strengthened 0.2 percent in Hong Kong’s offshore market amid speculation of dollar buying among large Chinese banks. International Monetary Fund staff recommended the yuan for a basket of reserve currencies, a move that Standard Chartered Plc estimates will lure more than $1 trillion to the nation’s assets in the next five years. The IMF executive board, scheduled to meet on November 30, must approve any changes to the basket.
Bonds
Ten-year Treasuries advanced, with the yield declining two basis points to 2.25 percent. The rate on German bunds fell one basis points to 0.55 percent. Australia’s three-year bond yields declined six basis points to 2.09 percent.
“We’ve had a bit of a flight-to-quality rally,” said John Gorman, the head of dollar debt trading for Asia and the Pacific at Nomura Holdings. “Travel, tourism is going to slow down. We’ve already seen concerts that are being postponed. It affects consumer spending and it affects the economies.”
The attacks probably won’t be enough to change the course of Fed policy as the US central bank considers raising interest rates next month, Gorman said.
Commodities
Gold halted four days of losses, with bullion for immediate delivery advancing 1.1 percent to $1 095.53 an ounce. It rebounded from as low as $1 074.25 on Thursday, the least since February 2010.
Crude oil rose 0.3 percent to $40.84 per barrel in New York as geopolitical tension spurred by the Paris attacks countered data on Friday showing US drillers put rigs back to work for the first time since August.
Syria’s oil output was less than 25 000 barrels a day in May, after averaging more than 400,000 barrels a day between 2008 and 2010, according to estimates from the Energy Information Administration. The nation borders Iraq, the biggest producer after Saudi Arabia in OPEC.
-With assistance from Anna Kitanaka, Wes Goodman, Adam Haigh and Anuchit Nguyen.
BLOOMBERG