Markets in rocky start as France to open

In Hong Kong, the benchmark Hang Seng index fell 1.6%, while in Japan, the benchmark Nikkei 225 index dropped 1%.

Market sentiment was weak before the attacks, with the UK's FTSE 100 closing at a six-week low and Wall Street having its worst week since August.

French financial markets will open as usual on Monday, Euronext has said.

 

A spokesperson for the stock and derivatives exchange said: "Our priority is the safety of our staff and there will therefore be extra security in place in Paris on Monday."

The euro, already under pressure from expectations that the European Central Bank could cut interest rates further next month, also fell on Monday.

The euro dropped to a six-and-a-half month low against the yen and fell 0.5% to $1.0710 against the dollar, nearing last week's six-and-a-half-month low.

'Negative impact'

French stocks, including those connected with the country's large tourism sector, could be most at risk of large falls, analysts say.

The tourism sector accounts for about 7.5% of French GDP.

"These Paris terrorist attacks and the larger scale of this attack could have a meaningful negative impact on the travel and tourism sector," said Robert T Lutts, president and chief investment officer at Cabot Wealth Management told Reuters.

"It is possible this could cause investors to take a bit more cautious stance on the higher risk sectors of the markets."

A decline in tourism in Europe could also weaken the euro, analysts warned.

IG France analyst Alexandre Baradez told Reuters that stocks "angled towards consumer goods or tourism, notably the luxury industry with the Christmas season, could be affected".

Hidenori Suezawa, financial market and fiscal analyst at SMBC Nikko Securities, added: "Given that France has a big tourism industry there may be some damage to the economy if this leads to a fall in visitors to France, or in tourism in general after the crash of a Russian plane."

'Rush to safety'

Following the Madrid bombings in 2004 and London bombings of 2005 the Spanish and UK markets dropped by 2.2% and 1.4% respectively.

"The knee-jerk reaction in other terrorist attacks over the last decade has been a rush to safety, including aggressive buying in the US Treasury markets," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC.

Many analysts believe any economic impact will be short.

"As horrific as these events are - and this is truly awful - economic activity does tend to be pretty resilient. At the end of the day, people have to get on with their lives," said Howard Archer, an economist at IHS Global Insight.

US equity strategist Sam Stovall said he expected stocks to start recovering after about a week.

"It's not something that's going to throw the European economy into recession," he said.