MARKETS SPECTATOR: Investor panic subsides

Have we seen the worst effect on local stocks from the dreadful events in Boston? Within the first half hour of trading the S&P/ASX 200 Index dropped more than 50 points. Since then the index has steadily ticked upward.

“There has been no panic selling as we saw after September 11,” says Matt Sherwood, head of investment markets research at fund manager Perpetual.

Still, selling may be the order of the day in the days ahead for certain sectors in the market as earnings expectations and economic growth forecasts are called into question. Consumer discretionary, materials, industrial, energy and information technology shares may slide, says Sherwood, as investors put the money into so-called 'defensive' stocks such as telecommunications, banking, health care, consumer staples and utility companies.

Elsewhere, the bomb explosions in Boston have only heightened the attractiveness of government bonds. The yield on the Australian 10-year has slid to 3.2 per cent from 3.6 per cent since March. US 10-year treasuries have seen a similar tightening in yield with the 10-year now at 1.7 per cent compared to 2.1 per cent in March. Most major market bond yields have crimped by 30 to 50 basis points.