Tags: terror | markets | investing | 911

WSJ: London Terror Attack Highlights Market Resilience

WSJ: London Terror Attack Highlights Market Resilience
London Mayor Sadiq Khan shakes hands with a police officer at the scene of the terror attacks at the Parliament building in London (Photo: Rex Features via AP Images)

By    |   Friday, 24 March 2017 08:41 PM

The deadly Islamic terror attack in London on Wednesday didn’t rattle markets that were more focused on the U.S. healthcare debate.

The British pound recovered in less than 30 minutes after news of the assault that killed four people, the deadliest attack in more than a decade in the U.K., according to The Wall Street Journal.

That rebound highlights how markets have changed in their reactions to terrorism, which in the past would spur investors to seek safe-haven bonds, while dumping stocks and currencies of the countries under attack.

“History suggests the impact [from terror attacks] can be short-lived, at least in very narrow market terms, even if the human cost can be devastating and painfully long-lasting,” Russ Mould, investment director at U.K.-based AJ Bell, told the newspaper.

Prior attacks resulted in the following market reactions:

  1. The Dow Jones Industrial Average fell 7.1 percent on its first day of trading and ended the week down 14 percent after the Sept. 11, 2001, attacks on New York’s World Trade Center, the Pentagon and United flight 93. Gold jumped 6.5 percent on its first postattack trading day.
  2. Spain’s IBEX 35 share index ended the day 2.2 percent lower after explosions on trains in Madrid killed about 200 people in 2004.
  3. The FTSE 100 index closed down 1.4 percent after falling as much as 3.5 percent after the July 7, 2005, attack on London’s public transport system.

Even airlines, which used to suffer massive selloffs following terror attacks, are more resilient as investors see little long-term effect on travel activity. Airline shares were the best performers in European markets on Thursday as they more than reversed Wednesday’s decline, the newspaper said.

Stocks are more likely to react to fiscal and monetary policy, as U.S. markets demonstrated this week.

Stocks on Tuesday had their worst day since before the election as the Republican plan to overhaul Obamacare met strong opposition from a conservative wing of the party. Investors fretted that Trump’s failure to get healthcare reform through Congress may embolden opponents to his plans to cut taxes and reduce regulation.

Negotiations between the conservative House Freedom Caucus, which wants a complete repeal of Obamacare, and Trump have been ongoing since Speaker of the House Paul Ryan, R-Wisc., introduced the bill last week. The vote had been scheduled for Thursday, but was later delayed.

“If investors lose confidence that the Republican administration and Congress can deliver tax cuts, we would expect a negative market reaction,” Ajay Rajadhyaska, co-head of global fixed income, currencies and commodities research at Barclays, said in a March 23 report, “but it seems unlikely that investors will price in any such political stalemate for several months; the Trump administration has made it clear that a fiscal package is likely only toward the end of 2017.”

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The deadly Islamic terror attack in London on Wednesday didn't rattle markets that were more focused on the U.S. healthcare debate. The British pound recovered in less than 30 minutes after news of the assault that killed four people, the deadliest attack in more than a...
terror, markets, investing, 911
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2017-41-24
Friday, 24 March 2017 08:41 PM
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