By Joyce Yu
Global equities are falling after a terrorist attack in Barcelona killed 13 people. U.S. stocks opened lower Friday.
The Dow Jones industrial average fell 274.14 points or 1.24% to 21,750.73 points. The travel stocks led the decline which is the biggest for the Dow since May. The S&P 500 was down 1.5% and the Nasdaq was down 1.9%.
Airlines and hotels dropped sharply on Thursday with JetBlue and Delta Air Lines being hit the worst, down by 5.2% and 6.1%, respectively. Decline of Hotel groups Accor, InterContinental and Melia Hotels ranged between 1% and 2%.
Asian markets also ended the day lower and all major European markets slumped in their morning sessions. Air France, British Airways owner IAG, easyJet and Ryanair were all down by more than 3% in early trading.
Jim Reid, a strategist at Deutsche Bank, told clients in a note, “In a week where we started by worrying about nuclear war, markets have quickly moved on from this, with yesterday’s weak session more of a response to fears that Mr Trump’s strategy for the economy and business is falling apart and later the terrible terrorist attack in Barcelona.”
The terror attacks “just add to all the other geopolitical mess,” Simon Quijano-Evans, a strategist at London-based Legal & General Investment Management Ltd., said in a note to clients. “At some stage that is likely to culminate into a more extreme market reaction.”
To some other investors, the on-going selloff is temporary.
Naoki Fujiwara, chief fund manager of Shinkin Asset Management Co. in Tokyo, told Bloomberg that neither the terrorist attack in Spain nor political turmoil in the U.S. should create a trend.
Barcelona’s terrorist attack fueled risk aversion as investors are still wary about U.S. policy paralysis and lingering tensions over North Korea.
Fears grew when rumors emerged about the possible resignation of Gary Cohn, who left his role as chief operating officer of Goldman Sachs to become Trump’s chair of the National Economic Council at the start of the year. While Mr Cohn did not resign, the uncertainty was widely blamed for the slip in stocks.
“The market had no definitive evidence that White House Economic Advisor Gary Cohn is unhappy in his job or debating resignation, but that didn’t stop investors from launching a full risk aversion campaign,” Citi’s FX analysts told the Financial Times on Friday.
Separately, the University of Michigan will release preliminary data for consumer confidence in August today, which will give a good sense of the sentiment of American consumers.
Consumer confidence soared to 98.5 in January – the highest level in more than a decade. Confidence surged on hopes that Trump’s administration would cut taxes, reduce regulations and spend on infrastructure. Consumer confidence fell to 93.4 in July as those plans have stalled.
