European and Asian stock markets were expected to fall sharply on Monday amid fears that the terror attacks in Paris would hurt Europe’s economic recovery.
Financial analysts predicted that markets would be rattled by the attacks, in which 129 people died and hundreds more were injured.
European markets are on track to shed 2% when trading begins, with the French market likely to bear the brunt of the selloff.
A full-blown financial crash was not expected, though, with economists hopeful that the French people would remain resilient following the worst terror attack in Europe for a decade.
“We are going to get off to a negative start in Asia, and then Europe will follow,” said Chris Weston, chief market strategist at IG. “But I don’t think we’ll see panic selling following the tragic events in Paris.”
“The tragedy has a lot of people asking questions, at a time when markets are already starting to look vulnerable after a strong October,” he added.
A 2% fall would wipe more than 100 points off Britain’s FTSE 100, sending it down to a six-week low.
Several Middle Eastern stock markets fell sharply on Sunday, with investors from Cairo to Dubai selling shares following Friday’s attacks.
Egypt’s main index, the EGX 30, tumbled by 4% in morning trading. The United Arab Emirates’ market shed 3.6% with many stocks suspended after slumping 10%, the daily limit.
The Paris stock market was scheduled to open as normal on Monday, despite the co-ordinated attacks across the capital on Friday night.
Yogi Dewan, the chief executive of Hassium Asset Management, also predicted that shares would fall sharply. He told Bloomberg he “wouldn’t be surprised to see markets down 2% to 3%, maybe even more”.
“Sectors will be impacted in Europe such as insurance, travel and leisure,” Dewan added.
Economists fear that French consumer confidence will be hurt by the atrocities in Paris, hurting an economy that returned to growth this autumn after stagnating over the summer.
“It is obviously likely to significantly hit the Paris economy in the near term, and there could also be a knock-on effect elsewhere in France,” said Howard Archer of 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.”
However, Archer believes France will avoid being pulled back into recession.
“As horrific as these events are – and this is truly awful – economic activity does tend to be pretty resilient. The UK, Spain and France itself has all seen its economies little damaged by terrorist atrocities in the past.
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.”
The attacks also raise the chances that the European Central Bank will announce new stimulus measures next month, to combat fears that the eurozone could sink back into deflation.
Michael Hewson of CMC Markets said further action was “pretty much inevitable”.
“The impact on consumer confidence could well be considerable, and anything that causes European consumers to retrench further is likely to be a significant concern for a European Central Bank already concerned about deflation and a lack of demand,” he said.