Tuesday 12 December 2017

Brussels attack: Wall St opens lower, airline stocks take hit

A picture taken on March 22, 2016 shows smoke rising from the Maalbeek underground, in Brussels, following a blast at the station close to the capital's European quarter
A picture taken on March 22, 2016 shows smoke rising from the Maalbeek underground, in Brussels, following a blast at the station close to the capital's European quarter
Europe Photo: Bloomberg

Wall Street opened lower on Tuesday after explosions in Brussels sparked fresh geopolitical concerns and sent investors scurrying for safe-haven assets.

At least 34 people were killed in twin attacks on Brussels airport and a rush-hour metro train in the Belgian capital, triggering security alerts across western Europe.

European markets fell, while traditional safe havens gold and government bonds firmed up as reports of the events in the de facto capital of the European Union unfolded. Airline and travel-related stocks were the worst hit.

Shares of American Airlines , Southwest Airlines and Delta Airlines, were down between 3 percent and 1.6 percent. The broader NYSE Arca Airline index was down 1.8 percent.

Gold rose 1 percent to $1,255 an ounce XAU=, while oil prices were swept lower.

"With economic growth so tepid around the world, including in the United States, the susceptibility to any type of terrorist attacks could highlight the market's fragility," said James Abate, chief investment office of Centre Funds in New York.

Markets have reacted negatively to terrorist attacks such as the one in Paris last November, before quickly recovering.European stocks fell and investors rushed for the safety of gold and government bonds on Tuesday, after two explosions at Brussels airport killed several people and blasts at metro stations in the Belgian capital.


Shares in Ryanair were down 2.45pc in early trade at €13.35 , while shares in Aer Lingus parent IAG had fallen 3.41pc as of 10:39, trading at 539p.

Both were up off earlier lows of €13.03 for Ryanair and 527p for IAG.

Shares in other major European airlines like easyJet and Air France-KLM were down as much as 4 percent (LHAG.DE), and hotel company Accor also fell 4 percent.

Belgian media reported that at least 11 people had been killed and that one of the blasts at the airport was a suicide bomber. This came four days after the arrest in Brussels of a suspected participant in November militant attacks in Paris that killed 130 people.

"The initial reaction in financial markets has been airline stocks all lower, and safe-haven capital flow with gold, German government bonds and the Japanese yen in demand," said Brenda Kelly, head analyst at London Capital Group.

"The news has certainly overshadowed much of the euro zone economic data this morning," she said.

At 0915 GMT the FTSEuroFirst 300 index of leading shares was down 1 percent at 1,326 points .FTEU3. Germany's DAX was also down 1 percent and Belgian stocks were down 0.8 percent .BEL20. These indices had earlier been down twice as much.

The STOXX Europe 600 Travel & Leisure index .SXTP was the top sectoral faller, down 2.2 percent.

Gold rose 1 percent to $1,255 an ounce XAU=, and the yield on benchmark German government bonds fell to a two-week low of 0.18 percent EU10YT=RR. U.S. Treasury yields fell 2 basis points across the curve US2YT=RR US10YT=RR.

In currency markets the Japanese yen, often considered a something of a safe-haven asset, rose across the board, notably against the euro. The euro was last down 0.6 percent at 125.10 yen EURJPY= and the dollar was down 0.3 percent at 111.60 yen JPY=.

The single currency fell a third of a percent against the dollar to $1.1205 EUR=.


For financial markets, the events in Brussels came in a week where liquidity was starting to dry up ahead of the Easter holiday and investors were beginning to think about cashing in on a steep rally in stocks over the last few weeks.

"Coming up to the Easter holiday, people are going to be very reluctant to put more money into these (stock) markets. If anything, they will be more likely to take money out," said Michael Hewson, chief market strategist at CMC Markets in London.

"Anything like the events we're seeing in Brussels this morning is going to weigh on risk sentiment and risk appetite," he said.

U.S. stock futures pointed to a fall of around a third of one percent on Wall Street ESc1.

Investors paid little attention to the economic data released on Tuesday which showed a slight pick up in German business morale and euro zone business activity in March

Earlier, Asian stocks seesawed as hawkish comments from U.S. Federal Reserve officials clouded the monetary policy outlook less than a week after Fed Chair Janet Yellen had set out a more cautious path to interest rate increases this year.

The dollar got a mild boost from the suggestion that interest rate hikes could be on the way sooner rather than later.

Japan's Nikkei stock index .N225 added 1.9 percent, closing at a one-week high, after markets in Tokyo reopened after a public holiday on Monday. A weaker yen, before the Brussels-related rebound, gave a tailwind to local shares.

Elsewhere, sterling was one of the biggest losers among the major currencies after ratings agency Moody's said Britain's credit rating will be put under pressure by a marked slowdown in fiscal consolidation unveiled in last week's budget.

The warning came amid concerns about Prime Minister David Cameron's ability to keep Britain in the European Union after leading 'Out' campaigner Iain Duncan Smith resigned from the cabinet late on Friday.

Sterling was last down 0.6 percent at $1.4281 GBP=, more than two cents off Friday's one-month high of $1.4514.

It was a rare day of stability in oil markets, with U.S. crude futures unchanged at $41.53 a barrel CLc1 and Brent crude LCOc1 also flat on the day at $41.60.


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