How financial markets responded to the atrocities that shook the world

Terrorist tragedies spur shocks in financial markets but the effects are normally short term and markets bounce back.

Attacks in New York on 9/11 triggered a sharp slump in the US stock market.

The S&P 500 shed 11% in the week after the attack but rebounded to pre-9/11 levels within a month.

In the UK, the FTSE 100 closed down 5.7% on the day of the attack but clawed back losses within three weeks.

Bombings on transport systems in Madrid in 2004 and the UK in 2005 proved stock markets to be even more resilient.

The Dow Jones Euro Stoxx index fell about 3% on the day of the Madrid attacks but recovered completely by the end of March.

On 7/7, the FTSE 100 closed down 1.36% after the London Stock Exchange imposed “special measures” to restrict panic selling.

But the index, which at the time was trading near record highs, was in positive territory within a day.

More defensive assets like sovereign bonds are likely to see increased demand in the wake of the Paris attacks.

Friday’s events had a short-term effect on France’s financial district, La Défense, this morning before its market bounced back.

A 2010 study found that US government bond market and bank stocks were the least-susceptible type of investment to terrorist incidents while the insurance sector and airline industry were the most sensitive.