By Riva Gold and Leslie Josephs
U.S. stocks pared earlier losses, but travel stocks continued to
lag the broader market after explosions in Brussels killed dozens
in what authorities described as terrorist attacks.
The Dow Jones Industrial Average slipped 31 points, or 0.2%, to
17592. The S&P 500 declined 0.1%, while the Nasdaq Composite
added 0.3%.
The Stoxx Europe 600 initially fell more than 1.3% in morning
trade before paring losses to 0.5%
Travel and leisure stocks fell sharply after explosions hit
Brussels' international airport and a subway station near European
Union institutions. 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 fell about 4%.
In the U.S., travel and leisure stocks were among the biggest
laggards in the S&P 500. Cruise operator Royal Caribbean
Cruises dropped 3.9%, while competitor Carnival fell 3%. Delta Air
Lines shares fell 2.1%, while American Airlines Group dropped
1.6%.
Exchange-traded funds that aim to track the travel industry fell
more than the broader market. The $184 million PowerShares Dynamic
Leisure and Entertainment Portfolio fell 0.8%, while the $54
million US Global Jets ETF, whose index includes airline operators,
slipped 0.9%.
"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.
As investors sought safety, gold rose 0.8% to $1,254 an ounce,
while the yield on 10-year German and U.S. government bonds fell.
Yields fall as prices rise.
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.
In recent years, financial markets have reacted swiftly 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.
The U.S. market's reaction to the attacks was muted.
"By and large, what I've observed over the past few years, as
sad as [terrorist attacks] are ... market has largely grown numb to
them and shrugged them off," said Keith Bliss, senior vice
president at brokerage Cuttone & Co. "Unless we see another
attack on the heels of this or another attack in a major
metropolitan center...I don't think the market's going to
react."
European bank shares 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%.
In currencies, the dollar was down 0.4% against the yen to
Yen111.6840, while the euro was down 0.3% against the dollar to
$1.1205.
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.
A reading of the U.S. manufacturing sector this month rose
slightly from February.
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 rose 0.4% to $41.71 a barrel in a
choppy session after swinging between small gains and losses.
Natalia Drozdiak contributed to this article.
Write to Riva Gold at riva.gold@wsj.com and Leslie Josephs at
leslie.josephs@wsj.com
(END) Dow Jones Newswires
March 22, 2016 11:43 ET (15:43 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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