One of the challenges of managing money is the (increasingly-frequent) need
to translate non-financial tragedies into action to protect clients and, yes,
profit from the broader world's horror.
So while most people react to events in Paris with stunned sympathy and/or
impotent rage, the financial community is deciding what to buy and sell. And
right now it looks like "sell" is winning.
Paris
attacks: global stock markets braced for sell-off
(Telegraph) - Global stock markets are headed for a sell-off on Monday after
the deadliest attacks to hit France since the Second World War left more
than 100 people dead and dozens injured.
Stock market futures pointed to falls in Asia, Europe and the US, as bourses
across the Middle East recoiled on Sunday amid warnings that the terrorist
attacks in Paris could spark a renewed bout of volatility.
The Dubai stock market fell 3.7pc in afternoon trading on Sunday to a fresh
2015 low, while stocks in Saudi Arabia lost 2.6pc and Egypt's benchmark index
dropped to a two-year low. Markets in Kuwait and Bahrain also fell.
Sustained oil price weakness has already prompted concerns about the region's
outlook.
Analysts said the attack was likely to hit tourism in Paris, which could
have consequences for the rest of France and Europe.
"The truly awful events in Paris could certainly have a significant negative
impact on consumer confidence in the near term at least," said Howard Archer,
chief UK and European economist at IHS Global Insight.
"There could also be an adverse impact on tourism in some European countries
where people think attacks are most likely to occur - not just in France...Volatility
should rise for Europe and for the Middle East."
Several things to consider going into next week:
First, the global equity markets were already correcting before the Paris
attacks. Last week was the worst for US stocks since August, and the plunging
price of oil combined with truly horrible numbers from major retail chains
pointed towards more volatility in any event.
Second, in recent years real-world events have not driven the financial markets.
Instead, the major central banks' reactions to events have become the
key indicator for most traders. So Europe's turmoil might, perversely, be applauded
by the markets if it ends the Fed's rate hike delusion and spurs the ECB to
even more amazing feats of debt monetization. Crazy, but entirely possible
in today's world.
And finally, this is the beginning rather than the end of a long process.
The political/financial implications of Europe's immigration debacle and America's
Middle East mess will take years to unfold. Elections are held at different
times in different places, so the anti-immigration, anti-austerity, anti-euro
tide won't fully come in until 2017 or beyond. In other words, lots more brutal
Mondays to look forward to.
