Markets fall after Istanbul terror attacks

MARKETS had a nervous day yesterday following the Istanbul bombings, but positive economic data from the US and comments by US Federal Reserve chairman Alan Greenspan helped offset falls.

Major European markets fell by 1% as news of the terrorist attacks filtered through, with airlines, travel operators and insurance companies particularly affected. Investors bought oil as well as gold and the Swiss franc, traditionally regarded as safe havens, amid fears of a wider terrorist-related campaign in western countries.

Shares in airlines Lufthansa, Air France and KLM fell by around 3%. Shares in travel operators and hotels also had similar falls, although major indices recorded smaller declines. London’s FTSE closed down 0.45%, while the DAX in Frankfurt was down 0.39%. The ISEQ index fell by 0.7%. New York’s Dow Jones fell slightly in early trading yesterday but was down less than 0.1%. Trading was suspended on the Istanbul stock exchange after falling more than 7% in the immediate aftermath of the bombings.

Later in the day, Federal Reserve chairman Alan Greenspan warned of the dangers of protectionism as leading American economists presented a cautiously optimistic assessment on the prospects for economic growth. In a response to the Bush administration’s move to impose tariffs on certain goods imported from China earlier in the week, Mr Greenspan said protectionism could lead to economic instability around the world. “It is imperative that creeping protectionism be thwarted and reversed,” he said.

Ulster Bank economist Niall Dunne said he was not surprised by Mr Greenspan’s criticism of protectionism. He added the market would be happier to see US policy move away from interventionist moves, such as the tariffs announced this week. Mr Greenspan said the US current account deficit, which is the subject of continuing concern among economists, would be defused with little disruption as long as disputes between trading partners over import tariffs could be avoided.

The Federal Reserve chairman’s comments came as the index of US leading economic indicators brought positive news. The Washington-based Conference Board said there was a rising trend of spending and investment and predicted continued economic growth over the next year.

The board's gauge of future economic activity rose by 0.4% in October after being unchanged the previous month. The index showed positive movement in respect of unemployment, consumer confidence and interest rates.