London explosions: Market reaction

LONDON - The city's streets rapidly emptied and financial markets plummeted as it became increasingly apparent that the blasts were an attack, and not a power surge on the underground train system as had been reported. On the currency market, the safe-haven Swiss franc hit a six-week high against sterling and rose more than 1 per cent against the dollar following the explosions.

"The market is showing a textbook reaction, buying safe-haven currencies like the Swiss franc and euro and away from the dollar," said Marios Maratheftis, currency strategist at Standard Chartered.

Oil prices fell three per cent and London's FTSE stock exchange index lost more than two per cent.The following quotes are reactions from market players to the news:

"We are hearing about brokers dumping principal positions. I have had several orders suspended which are well out of the money. This shows there is real panic out there," said one trader near Liverpool Street, where some of the first reports were based from.

"People don't know what to do. You can't get a price on anything on any side. There's no trading on the screens," one European-based dealer said.

"We're trying to cover a couple of positions but we just can't cover them unless you really want to pay and we're not quite ready for that yet."

"We are farming out orders to other financial centres, such as Paris because of the uncertainty on the ground in London. If I had the guts I'd be buying now," one London-based dealer said.

"These things highlight the risks that are still out there and in a sense equity markets have been taking a reasonably benign view. And this is a reminder that things are not entirely benign," said Mark Precious, co-head of global equity strategy at UBS.

"Unless this has a very strong impact on consumer confidence, I think you would expect markets to recover from this. I do think markets will find support rather than just go along (down)."

"There is absolute panic. The market thinks, until it is confirmed otherwise, that there has been a terrorist attack in London," said Flemming Barton, trader at Portuguese bank BPI in Madrid.

"Insurers are always first to get hit in a situation like this, in addition to the tourism industry," said Giuseppe Amato, a market analyst at Lang&Schwarz in Duesseldorf.

"There's nothing on the screens. It stops. The news comes and goes. People don't know what to do ... You can't get a price on anything on any side," said a trader in London.

"We are farming out orders to other financial centres, such as Paris because of the uncertainty on the ground in London," said one London-based dealer.

"In the last 20 minutes or so, it has become an increasing possibility that it's a terrorist incident, as opposed to initial reports of a power outage and that's moving the market," said Neil Mellor, currency strategist at Bank of New York.

"The way the long-gilt futures are trading there's quite a lot of panic going on in markets," said David Cryer, bond strategist at Carr Sheppards Crosthwaite.

"The market is moving on this. The Swiss franc is rising because it is seen as an ultimate safe haven. Sterling has also moved a bit," said Shahab Jalinoos, senior currency strategist at ABN AMRO.

"I'm stranded. I'm now walking from Kennington to my office (near Liverpool St. station). No cab. Buses are packed full, and I must get there before the MPC and the ECB," said Ranvir Singh, head of European markets at Refco.

Emergency phone numbers

Ministry of Foreign Affairs and Trade NZ: 0800 432 111.

NZ High Commission in London: 0044-20-7930-8422.

- REUTERS