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Daily Briefing: London attack - low tech, high impact
March 23, 2017 / 8:22 AM / in 7 months

Daily Briefing: London attack - low tech, high impact

A woman assists an injured person after an incident on Westminster Bridge in London, March 22, 2017. REUTERS/Toby Melville

LONDON (Reuters) - A hired car and a kitchen knife - that is all that is needed for a low-tech, lone wolf attack such as that in London yesterday to kill four, wound dozens and generate headlines of terror around the world.

Authorities have long known Western societies were vulnerable to such methods, but stopping them is another matter altogether. British police say the attack looks "Islamist-related" and have raided addresses in Birmingham, London and elsewhere, making seven arrests.

The spectre of inflation hit German consumer sentiment data, with the latest GfK survey showing people are worried that rising prices will erode their purchasing power.

At the same time, the German finance ministry has issued a statement defending the country's large and much-criticised current account surplus, insisting it is simply down to the competitiveness of the German economy and the government has no influence over it. Interestingly, however, it says the surplus will shrink as a result of demographic changes which, among other things, will create a large skills gap in coming years.

Meanwhile, Poland is threatening to ruin the European Union's 60th birthday party in Rome this weekend by refusing to sign up to the joint declaration intended to chart the bloc's course after Britain leaves. Its prime minister has just said it will not accept the document unless it includes key Polish demands - more on that story to come.


Injured people are assisted after an incident on Westminster Bridge in London, March 22, 2017. REUTERS/Toby Melville

Relative calm on world markets after Tuesday’s jolt suggests investors are not ready to throw in the towel on this bull market just yet. A significant unwind of the Trump reflation trade has taken place over recent weeks – cut across everything from the dollar, financial stocks, Treasuries, metals and mining - and Thursday’s vote in Congress on the new administration’s healthcare bill is now seen as a litmus test for just how hard it will be to get far more market-sensitive tax, spending and de-regulation measures through.

Complicating the picture slightly later in the day will be a speech from Fed chief Yellen. For now at least, the economic picture seems healthy enough for most investors to stay calm and end-quarter assessments from all the major investment houses are upbeat on growth through the rest of 2017. Many big asset managers, including Blackrock, see any pullback in markets as a relatively correction for now.

An armed police officer patrols outside New Scotland Yard the morning after an attack by a man driving a car and weilding a knife left five people dead and dozens injured, in London, Britain, March 23, 2017. REUTERS/Neil Hall

MSCI’s index of world stock markets is higher this morning, breaking a four-day losing streak. The S&P500 and Nasdaq both rallied late Wednesday. The pop in the ViX ‘fear index’ to above 13 percent for the first time since January yesterday has proved short-lived and it’s hovering about 12.70 percent first thing. Brent crude oil lunged below $50 briefly late Wednesday, but has regained a toe-hold above that level again this morning. U.S. 10-year Treasury yields are slightly firmer just above 2.40 percent.

Euro/dollar is steady back just below $1.08. Asia bourses, including Tokyo’s Nikkei, were slightly higher overnight – with little durable impact yet from a domestic scandal over land deals that threatens to embroil Prime Minister Shinzo Abe. Dollar/yen was steady just above 111/$.

Sterling was also steady just under $1.25 in early trading after registering only a fleeting dip on Wednesday’s attack on the UK parliament building in London. The history of these attacks, including those in France, Germany and Belgium last year as well those in London and Madrid more than 10 years ago, show little lasting impact on economic confidence or financial markets in isolation. However, markets will watch today’s release of UK February retail sales closely amid considerable concerns about flagging UK consumers into the new year as inflation rises.

Ten-year French debt spreads over Germany’s continue to tighten marginally to as little as 60 basis points as French opinion polls continue to see centrist Emmanuel Macron as firm favourite to win the presidency in May.  A second member of the incumbent Socialist Party government, junior sports minister Thierry Braillard, said on Thursday he would back Macron for the presidency. An unexpected dip in French industry sentiment readings to a four-month low in March had little immediate impact.

Editing by Gareth Jones

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