Stock markets on edge after Paris attacks | Business| Economy and finance news from a German perspective | DW | 16.11.2015
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Stock markets on edge after Paris attacks

The tragic events in France's capital have caused unease in financial markets, with tourism-related shares hit particularly hard. But Paris traders proved they will not be cowed, opening trading amid high security.

The shock following the weekend's tragic attacks in Paris, which killed at least 129 people, rippled across global markets on Monday as traders began the week visibly on edge.

Proving that France will not be cowed by terrorists, financial markets opened as usual on Monday amid increased security. Still, stocks sank in early trading, with tourism and luxury-related companies particularly hit by fears. The CAC 40 index of top French companies dived 1.1 percent to 4,756.92 points in early trading, before pulling back in the course of the day, ending just 0.1 percent down. Aeroports de Paris, the operator of the capital's Charles de Gaulle and Orly airports, saw shares drop about 5 percent, as did aviation giant Air France, while Eurotunnel traded 4.5 percent lower.

In neighboring Germany, Frankfurt's DAX 30 slid 0.9 percent to open at 10,609.14 points compared with the last close before the devastating attacks, but fully recovered to end slightly higher. At London's FTSE 100, initial deals fell 0.6 percent to 6,080.83 points.

Fear on Asian markets

Asian stocks fell to six-week lows and emerging market currencies wilted as investors looked to the greenback for safety, while steering clear of the euro amid mounting fear for security in the currency bloc.

"Risk aversion is on the rise and we are seeing broad-based US dollar strength across the board and this may continue until the year end as recent economic data has also disappointed," said Mitul Kotecha, head of Asian FX and rates strategy at Barclays in Singapore.

Back into recession

Japan proved a case in point on Monday as both nervousness following the deadly terror attacks, and disappointing quarterly results weighed heavy on the Tokyo stock exchanges.

New data showed that the world's third-largest economy slipped back into recession after shrinking an annualized 0.8 percent in the third quarter. It was the second straight quarterly decline, and also the second time Japan has suffered six straight months of economic contraction - a technical recession - since Prime Minister Shinzo Abe came to power nearly three years ago.

The figures were worse than analysts' had expected, and dealt a fresh blow to Abe's program of aggressive monetary and fiscal stimulus - dubbed Abenomics - aimed at jumpstarting growth.

Reacting to the uncertainty at home and abroad, the benchmark Nikkei closed down 1.04 percent, or 203.22 points, to 19,393.63, while the broader Topix index of all first-section shares, ended the day 0.90 percent in the red at 1,571.53.

China rebounds

In neighboring China, exchanges also took a hit in early trading, but most sectors managed to reverse losses later in the afternoon as fears eased. Meanwhile, Hong Kong stocks dropped, with the Hang Seng Index down 1.7 percent to 22,010.82, and the China Enterprises Index falling 2 percent to 9,978.80 points.

South Korea's Kospi ended the day down 1.5 percent, while Australia's S&P index closed 0.9 percent lower.

Travel fears

Airline stocks were among the worst hit on concerns that the Paris attacks could scare off tourists. Japan Airlines sank almost three percent and rival ANA nosedived 3.5 percent, while Down Under Virgin Australia plunged 6.5 percent. Indonesian flag carrier Garuda fell 1.3 percent.

"There will definitely be a negative psychological impact in the short term in tourism-related sectors. Airlines are particularly affected," Zhang Qi, a Shanghai-based analyst with Haitong Securities, told Bloomberg News. The situation in France is "still quite uncertain now, so investors seem to be broadly risk-off today."

Kiyoshi Ishigane, chief strategist at Mitsubishi UFJ Kokusai Asset Management, echoed those sentiments, but predicted the negative effects would be contained. "Global markets may turn to risk-off in the short term as geopolitical risk rises," Ishigane told Bloomberg News. "But I think the impact to the global economy is limited, even if there is some impact on the French and (European Union) economies."

Tension fuels oil prices

Meanwhile, the geopolitical tension sparked by the weekend's attacks sent oil prices rising in Asia. At around 6:30 a.m. GMT, US benchmark West Texas Intermediate for delivery in December was up 19 cents to $40.93 and Brent crude for January was trading 30 cents higher at $44.77 a barrel.

"With France starting to increase its (military) efforts in the affected region, prices for the rest of the week may have some upper push," aid Daniel Ang, an investor with Phillip Futures in Singapore.

However, he added, the continuing oversupply of oil was likely to shackle gains.

"Price increases fuelled by geopolitical tensions will only be for the short term. For the longer term, the main driver for prices will be global supply and demand, and with the glut it would be a bit more difficult for prices to move up a lot further," Ang told AFP news agency.

pad/uhe (AFP, Reuters)

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