Terror attacks set to weigh down shares

MARKETS are braced for a nervous session today after the terror attacks on Paris.

Experts warn that stock markets could fall by 2-3pc this morning and that the euro will come under pressure against the pound and the dollar.

The Paris Bourse is set to open for business as usual today with additional security measures to protect staff.

In previous events such as the 2004 attack on Madrid and the 7/7 bombings in London a year later, investors initially rushed into safe havens such as US government bonds and gold.

Any reaction in share prices will be short-lived unless there are further outrages, analysts claimed.

‘This is very different from 9/11 which was the first time something like this happened. Markets were down more than 7pc then because the event occurred in the early morning and traders had all day to respond,’ said David Buik of broker Panmure Gordon.

‘This time it happened after markets closed so people have had all weekend to digest the news. The markets are in a bad state anyway so there will be some kind of a reaction but not a hysterical one.’

Several Middle Eastern stock markets that were open yesterday were hit by sharp falls.

Global stock markets have already been pummelled over the summer by fears over the slowdown in the Chinese economy and shares around the world were bruised last week by the fall in the oil price.

Traders are nervous over prospects of an interest rate rise in the US, though it is possible that rate rises in America and the UK may be delayed further as a result of the Paris atrocities.

The attack could lead to a slump in the fragile French economy and take a toll on the eurozone as a whole.

Consumer confidence may suffer as a result of the attacks if shoppers in Paris and other big cities stay at home for fear of being a target. Tourism, which accounts for around 7.5pc of the French economy, may be hit along with the leisure sector.

Figures published on Friday by official agency Eurostat revealed that France expanded by 0.3pc in the latest three months, after achieving no growth at all in the second quarter. The Paris slayings will inevitably prompt speculation it may hurtle back into recession.

That may force the European Central Bank to pump in billions of pounds of more freshly-minted QE money to support the single currency bloc.

However, Howard Archer, economist at IHS Global Insight, believes France will avoid a renewed slump.

‘As horrific as these events are – and this is truly awful – economic activity does tend to be pretty resilient,’ he said.

‘At the end of the day, people have to get on with their lives. And that is the best way of putting up two fingers to the terrorists.’