Markets Set to Fall as Paris Mourns
God bless you... Both events in Paris and economical influence are terrible, especially the first
Paris Terror May Boost Economy: 'Dr. Not So Gloom Anymore' Roubini Friday's terrorist attacks in Paris could end up boosting the euro area economy, economic superstar Nouriel Roubini said on Tuesday, predicting that the European Central Bank (ECB) could decide to loosen up its monetary policy more than previously intended.
Roubini, the founder of Roubini Global Economics, told CNBC that, however, the impact would be "modest" if the central bank decides not to reflect the events.
So far, however, the ECB's top policymakers haven't signaled any signs of economic worries resulting from the November 13, Paris assaults. On Tuesday, ECB chief economist Peter Praet said that events such as the ones seen in Paris on Friday tended to have a transitory effect on the economy but did hurt confidence.
On Wednesday, ECB Governing Council member Yves Mersch said that there were no signs yet that the recent terrorist attacks in Paris have negatively affected the euro area's economy, so it is premature to draw any conclusions.
Dr. Not So Gloom Anymore
Turning focus to the global economy, Roubini, nick-named 'Dr. Gloom' for his persistently pessimistic predictions, said surprisingly that the fears of the global recessions are not warranted.
"We're not going to have a global recession because China is going to be able to avoid a hard landing," he told the TV channel.
Even the US won't fall into recession. "I think the chances of a US recession are very low. To have a US recession, either you have to have a hard landing in China … or you need to have a situation in which the Fed starts hiking too much too soon," he said. "That's unlikely, it's going to be the opposite, or a situation in which it starts hiking too late and the situation starts to get out of control and you have to tighten."
Still, he said he expects global growth to be mediocre throughout the world. "Returns for US equities are going to be barely low-single digits."
He also said the Fed funds rates by the end of 2016 will rise to 1-1.25% from the current near zero, but didn't predict the timing of the initial rate hike, saying it "doesn't matter".
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Markets are set to open lower on Monday after the terrorist attacks in Paris on Friday which saw 129 people killed and many more injured.
Events in Paris are likely to have a negative impact on market sentiment early on Monday, with the broader negative impact of lower consumer confidence and restrictions on borders hitting tourism and economic sentiment later on.
"The truly awful events in Paris could certainly have a significant negative impact on consumer confidence in the near term at least – obviously primarily in France but also elsewhere in Europe as people in many other countries will be wondering if they could be the next to suffer such an atrocity - UK, Spain and Belgium being obvious examples given their past history of terrorist attacks and in the case of Belgium the fact that there are clearly terrorist cells there that have been involved in the French attacks this year," Howard Archer from IHS Economics wrote in a note to clients on Sunday.
Apart from the broad political implications, markets worldwide are likely to react negatively to the developments in France.
Safe-haven assets are likely to be preferred by investors worldwide and equity markets in Europe are likely to suffer on Monday.
"Investors will likely start the week with a risk-off trading theme with safe-haven assets preferred," Neil MacKinnon from VTB Capital noted on Sunday.
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