Yesterday, a lorry has ploughed through a crowd during Bastille Day celebrations in the southern French city of Nice. At least 84 people died and many more are injured. In the end, the lorry driver was shot dead by police. In this article we will look at how this horrible terror incident influenced markets.
Shortly after the Nice terror attack, European markets ceased to grow. Euronext, CAC 40 and DAX dipped 0.50%, 0.47% and 0.04% respectively. Swiss Market Index was down 0.25% at around 11am ET. The only major index that grew was FTSE 100 being up 0.05%.
On the other hand, Asian markets continue to grow. Their growth is encouraged by newly processed data that show that Chinese economy grew 6.7% in second quarter of 2016. Hang Seng grew 0.5% and Nikkei 225 grew 0.7%. Shanghai Composite is near 3 month high at 3054.30 points. South Korean Kospi grew 0.4%.
Terror attack caused stocks of mainly travel and leisure companies to fall. French hotel chain Accor, low cost airline EasyJet and tour operator Thomas Cook all fell by more than 3% on Friday. Even Swiss watch producer fell 12% today. Europe is and will remain a prime tourist destination. But the string of attacks over the recent past will surely continue to have a chilling effect on that sector.
As we can see from the stocks fluctuations examined above, terrorism has a significant impact on the markets in the short term. One of the most extreme examples of what terrorism can do to markets is the September 11th incident. On September 10th, 2001, the Dow Jones Industrial Average closed at 9,605.51. In the aftermath of the September 11th terrorist attacks, the market reopened on September 17th, 2001, and hit an intraday low of 8,755.46 as according to investopedia.com.
Usually, impact of terrorism on markets is short lived. Last year’s attack in Paris, terrorism at Atocha Station in Madrid in 2004 or bombings in London in 2005 all caused stocks to fall but after few days or weeks markets recovered. Therefore, we can expect that stocks will start growing soon. It might be a good idea to invest in the companies which stocks are down due to terrorism.