Investors wait on evidence of terrorist attacks' impact
Traders will be watching market action this morning to assess what the impact of the terrorist attacks will have on investor sentiment. This will need to be unravelled from what was going to be a weak opening in any event. Market sentiment this morning will also be negatively impacted by lower US and European markets as well as a sagging oil price.
Investors may be reluctant to get too defensive in response to the weekend terrorist attacks at this stage. Ultimately there will need to be evidence of an enduring blow to consumer or business sentiment, or signs of a significant and costly escalation in the West’s response, to have a lasting impact on the investment climate. The weekend attacks certainly create uncertainty for markets but to some extent investors have already assumed the terrorist threat is an ongoing part of the current economic and risk background. Investors are also aware that any major increase in market volatility could lead to a response from central banks, including a delay in the Fed’s December rate hike.
Another slide in the oil price on Friday will be a concern for investors in the energy sector. The cuts to US production seen so far have not been enough to bring the market back to balance. Even though further cuts in US production are expected, it may yet be some time before the oil market approaches balance if Iranian production comes back to the international market.
Frequently Asked Questions about this Article…
Terrorist attacks can create uncertainty in the markets, affecting investor sentiment. However, investors often consider such threats as part of the ongoing economic and risk environment. A lasting impact would require evidence of a significant blow to consumer or business sentiment or a costly escalation in response.
Investors should monitor market reactions and look for signs of enduring changes in consumer or business sentiment. Additionally, they should be aware of any significant responses from central banks, such as potential delays in interest rate hikes.
Lower US and European markets can negatively impact global investor sentiment by contributing to a weaker market opening and increasing overall market uncertainty.
The oil price is crucial for energy sector investors because it affects the profitability of oil production. A sagging oil price, like the recent slide, can be concerning as it indicates an imbalance in the market, potentially affecting returns.
During increased market volatility, central banks may intervene to stabilize the economy. For instance, they might delay planned interest rate hikes to support market confidence and economic stability.
The return of Iranian oil production to the international market could delay the balance of the oil market, as it adds to the supply, potentially keeping prices low and affecting investor returns in the energy sector.
While investors might be cautious, becoming too defensive immediately after a terrorist attack may not be necessary unless there is clear evidence of a long-term impact on consumer or business sentiment.
Factors such as increased market volatility and uncertainty following events like terrorist attacks could lead the Federal Reserve to delay its planned December rate hike to maintain economic stability.
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