Global Stocks Continues to Fall After Brussels Explosions

 

Global stocks fell and haven assets gained Tuesday as investors reacted to reports of explosions in Brussels.

Several explosions rocked Brussels at its international airport and at a subway station near European Union institutions Tuesday, killing at least 27 people and injuring many more in what authorities described as terrorist attacks.

The Stoxx Europe 600 initially fell more than 1.3% in morning trade before paring losses to 0.9% halfway through the session.

Futures pointed to a 0.4% opening loss for the S&P 500, pulling back from its highest closing level this year. Changes in futures don’t necessarily reflect market moves after the opening bell.

Europe’s travel and leisure stocks fell sharply after Belgian officials shut down the entire public transport network in Brussels and immediately raised the terror alert across the country to its maximum level. Shares in Air France-KLM and Thomas Cook Group PLC were both down more than 4%.

“It’s hard to say what the long-term impact is, but it’s not good,” said Sanjiv Shah, chief investment officer at Sun Global Investments. “There are worries about security, the impact on growth, greater restrictions on travel. It’s just more uncertainty,” he said.

The explosions come just days after the arrest of Salah Abdeslam, one of the alleged Paris attackers who was captured in Brussels after a four-month manhunt.

European bank shares also fell Tuesday after Moody’s Investors Service said it is reviewing Deutsche Bank AG ’s credit rating for a possible downgrade, sending shares in the lender down 2.5%.

As investors sought safety, gold rose 0.7% to $1,250 an ounce, while the yield on 10-year German and U.S. government bonds fell. Yields fall as prices rise.

In currencies, the dollar was down 0.4% against the yen to ¥111.6840, while the euro was down 0.3% against the dollar to $1.1205.

In recent years, financial markets have reacted quickly to attacks in western cities before quickly recovering. Markets from equity to bonds and gold were little disrupted by the killing of at least 129 people in Paris last November. Still, losses in the securities of airlines and travel companies tend to linger for longer.

Tuesday’s moves came after Wall Street climbed slightly Monday to close at its highest level this year, but trading volume fell to a 2016 low in a holiday-shortened trading week.

Stocks have steadily climbed back from steep losses at the beginning of the year, spurred by improvements in U.S. economic data, a rebound in commodities prices, and a more dovish stance from the Federal Reserve and European Central Bank.

As volatility recedes, investors are now assessing whether the rally has further to go.

“Central banks have created a bit of a buffer for markets, but we think there are still sufficient uncertainties that will keep markets volatile this year,” said Eric Wiegand, senior portfolio manager at U.S. Bank Wealth Management, pointing to questions around China’s economy, commodity prices, and the U.S. labor market going forward.

“We’re still very anxious to get into the earnings season,” he said, with trade expected to be choppy until investors get a clear sense of corporate performance.

In economic news, the composite purchasing managers index for the eurozone rose in March, beating investors’ expectations, while German business sentiment brightened as companies grew more upbeat about the country’s outlook.

Investors will eye data on the U.S. manufacturing sector later Tuesday after a key gauge of manufacturing activity rose last month to its best reading since September.

Despite the recent pickup in data, “We’re experiencing a slow growth world, and I can’t see that changing,” said Gary Greenberg, head of emerging markets at Hermes Investment Management.

The Shanghai Composite Index snapped a seven-session winning streak earlier Tuesday after Chinese authorities tempered a pledge to accelerate the development of China’s capital markets and guided the yuan weaker.

Japan’s Nikkei Stock Average ended 1.9% higher as it reopened from a holiday.

In commodities, Brent crude oil fell 0.6% to $41.28 a barrel in a choppy session after swinging between small gains and losses.