Market sentiment dip in the wake of the Parris attacks

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 16, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Mumbai) - The terrorist attack on Paris that left the country mourning and the world stunned into silence, is bound to have great economic repercussions as well, as seen in the case of Madrid and London in the past. Post the Madrid bombings in 2004 and London bombings of 2005 the markets had dropped by 2.2% and 1.4% respectively. Many analysts however believe that any economic impact will be short lived. Howard Archer, an economist at IHS Global Insight rightly put across market sentiments when he said “"As horrific as these events are - and this is truly awful - economic activity does tend to be pretty resilient. At the end of the day, people have to get on with their lives”. Stocks can be expected to start recovering after about a week.

    Investors can now be expected to look out for safe havens in the wake of the attacks which killed at least 129 people.

    Tourism sector stocks to get affected

    Terrorist attacks render a huge blow to the tourism sector. The safety concern discourages tourists and hits the revenue that is earned from the tourism sector. The Paris attacks will thus be a blow the French economy as the tourism sector accounts for about 7.5% of French GDP.

    The French stocks, particularly those associated with the tourism sector are bound to take a hit post the attacks. The insurance sector stocks are also like to see a fall.

    Robert T Lutts, president and chief investment officer at Cabot Wealth Management told Reuters that this attack would make investors more cautious particularly with respect to the higher risk sectors of the market.

    With the holiday season around the corner the attack is likely to play spoiler for the country’s huge travel and tourism sector. Consumer goods or tourism, notably the luxury industry will be hit.

    Euro hit

    Analysts have warned that this attack will bring bad news for the euro as well. A decline in tourism in Europe will further weaken the euro. It must be noted here that the euro is currently under huge pressure as an interest rate cut by the ECB looms.

    The euro, on Monday dropped to a six-and-a-half month low against the yen and fell 0.5% to $1.0710 against the dollar, close to last week's six-and-a-half-month low.

    Asia stocks suffer

    Markets woke up to a gloomy day. Asian stocks fell to six-week lows today and emerging market currencies fell as investors sought the safety of the greenback post the Paris attack as well as the not encouraging Japan data.
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