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Markets resilient after UK attacks

Investors less likely to panic from terrorist threats, says analyst

By S. Adam Cardais
Staff Writer, The Prague Post
July 13th, 2005 issue

The Prague Stock Exchange (PSE) has mirrored the resiliency of other world markets to the July 7 terrorist attack on London that claimed the lives of more than 50 people, with stocks suffering an initial plunge before rebounding strongly.

The attack will not likely have a long-term effect on the PSE or other markets, which have become increasingly resistant to external threats like terrorist attacks, according to economic analysts.

Indeed, markets bounced back quickly after the immediate shock of the blasts that destroyed a double-decker bus and rocked three commuter trains in the London Underground, forcing some rush-hour commuters to evacuate the tube on foot.

The main index PX 50 closed only 0.14 percent down at 1,219.1 points on the day of the attacks after dropping more than 2.2 percent. In London, the FTSE 100-share index closed 1.4 percent lower after dropping 4 percent shortly after trading opened. All three major American stock gauges finished the trading session with gains.

The PSE didn't stay down for long, however, and quickly wiped out Thursday's losses. Before midday July 8, the PX 50 had risen 0.38 percent to 1,223.7 points and closed at 1,224.7. By the end of trading July 11, the PX 50 had reached its highest level since the middle of March, 1,228.2 points.

The limited scale of the attacks relative to those in Madrid March 11, 2004, which killed 191 people, and in New York City and Washington, D.C. on September 11, 2001, played a part in the quick rebound of the markets. But many analysts noted that investors have learned from experience to stay cool in the face of calamitous events.

"Investors know how to act, because they already have experience from the past," said Markéta Šichtařová, chief economist at Next Finance. "They're not so surprised."

As a result, investor confidence has become more difficult to shake, making the financial reverberations of such attacks less severe. Neither the bombings in Madrid nor the attacks in Washington and New York City had serious, long-lasting market ramifications. Markets faced more difficulty overcoming the internal assault of the corporate accounting scandals of the late-1990s.

Šichtařová said a much larger attack could damage economies by lowering consumer confidence, which would likely force down consumer consumption as well, but that markets won't be feeling any lasting effects from the London bombings.

"Today, you cannot find any sign that this happened," she said, pointing to market positions a day after the explosions.

S. Adam Cardais can be reached at acardais@praguepost.com


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