Brussels blasts drive investors to safe havens

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Belgium’s terror attacks sent shockwaves through the City today as investors bailed out of airline and hotel stocks in favour of safe havens.

With dozens feared dead in Brussels, airlines including easyJet, Ryanair and British Airways owner IAG bore the immediate brunt of the reaction in financial markets. 

The latest attack follows outrages in Istanbul and Paris. It hit travel operators and hotel groups such as Thomas Cook, whose shares slipped 4%. 

Cook chief executive Peter Fankhauser — reporting pre-close figures today just before the horrific news from Belgium — warned that some customers “are leaving it later to book this year as they consider their options”.

Bookings to Europe are already 8% down on last year, and the firm’s guidance depends on “a sustained recovery in customer confidence as we progress through the summer season”. 

Other stocks on the back foot in response to the attacks included Eurotunnel, Intercontinental Hotels Group and cruise ship operator Carnival, which fell 2% or more. 

London’s FTSE 100 fell 0.5%, while European stock markets showed losses of up to 1%. Investors fled to the traditional safe havens of gold — up $10 to $1254.70 an ounce — boosting the price of precious metals miners Fresnillo and Randgold, up 2% and 1.4% respectively.

Government bonds were in demand as yields on US Treasury bonds, gilts and German bunds — which move inversely to their price — all fell sharply. Japan’s yen, another crisis bolthole, also rose in value. 

Financial data firm Markit’s latest snapshot of the eurozone economy showed the first increase in the pace of growth since December, but the more positive news was swamped by the attacks.

CMC Markets analyst Jasper Lawler said: “Terrorist incidents are becoming more frequent in Europe, which is a travesty for those directly affected, but also makes investing in the continent that much less attractive.

“The explosions are bad news for airlines which have just started to see passenger demand pick up again after a slump in the wake of multiple terrorist incidents at the end of last year.”

The pound also suffered against the dollar and the euro amid speculation that another terror attack in Europe could sway voters in the direction of a vote to leave the European Union in June’s looming referendum. 

Lawler added: “The British pound has fallen more than the euro on heightened Brexit risk. Britons may feel safer outside of an EU which is starting to become a hotbed of terrorist activity.”

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March 23, 2016 |
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