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Analysts: Paris Terror Will Have Temporary Economic Impact

FILE - A shopper walks by a store in Paris, France.
FILE - A shopper walks by a store in Paris, France.

Worries sparked by Friday’s terror attacks in Paris rippled through the global economy, but the impact may not last long.

In the immediate wake of the assaults, concerned investors sold some stocks, particularly those in the tourism industry like hotels and airlines. Demand and prices rose for safe haven assets like gold, U.S. dollars, and certain kinds of government bonds. And oil prices gained.

On Monday in New York, traders held a moment of silence at the beginning of the trading day in memory of the victims in Paris. Stocks were lower at the start of trading.

Sam Stovall of S&P Capital IQ says the biggest potential economic impact of the terror attacks would come if the attacks damaged investor confidence. The economy could slow if business is too worried to invest the money needed to expand operations and create growth and jobs.

But Stovall says looking at decades of stock market shocks, the usual immediate decline on the S&P 500 is about 2 percent. Experience shows further short-term declines bottom out at 6 percent, and recovery takes an average of about 20 days.

CCLA Chief Investment Officer James Bevan said “markets have been surprisingly calm.” He told Reuters television that the overall impact was less than expected, although there could be a “longer term” impact on the tourism sector. “

That could be painful for France, which is the most popular tourist destination in the world, collecting more than $57 billion from more than 83 million visitors in 2014.

Right after the attacks, security concerns prompted the closing of the Eiffel Tower as well as bars, restaurants and many other attractions that normally host large groups of visitors.

Concerned investors also abandoned the euro currency, perhaps due to concerns that increased security measures, including more border checks, could crimp international commerce. The euro hit a six-month low, but then recovered some value. There also was upward pressure on oil prices, as France stepped up airstrikes at suspected terrorist targets in Syria.

Military action in the Middle East tends to raise oil prices because it raises concerns that attacks could slow production or transportation of key energy products, cutting the supply.

Related video report by Mil Arcega:

Economists: Paris Attack Impact Likely Short-Lived, With Caveats
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