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Geopolitical tensions are once again at the forefront as last week’s terrorist attacks at a satirical weekly newspaper in central Paris shocked and outraged the Western world and its allies. Charlie Hebdo, the biting and sarcastic newspaper, drew repeated threats from Islamic terror organizations for its caricatures of the religious figure Mohamed. On Sunday, January 11th, international leaders in a show of solidarity, converged onto the French capital to march with demonstrators, many of whom have popularized the phrase “Je suis Charlie” as their battle-cry for freedom of speech.
In a rare moment of harmony, both Israeli Prime Minister Benjamin Netanyahu and Palestinian Authority President Mahmoud Abbas were present at the demonstration, temporarily setting aside bitter differences for a greater cause. In a surprising snub, the United States sent only one low-level official, citing security concerns for the reason why a higher profile official was not sent. This of course led to harsh criticism, with Texas Congressman Randy Weber accusing President Obama of apathy and cowardice, referencing Adolf Hitler’s willingness to go to Paris, albeit for the wrong reasons. While the majority of media pundits feasted on this and other controversies associated with this latest act of terrorism, what has gone largely unreported is the severe financial impact to the French economy.
Severe Drop In Traffic and Revenue
For many retailers in France, the tragedy could not have come at a worse time, having occurred on the first of six weeks of winter clearance sales, a sort of Black Friday month as store managers slash prices to move aging inventory in favor of the latest products or fashions. According to a recent article from Reuters, retailers reported revenues down as much as a quarter during the critical opening week, while the head of the National Association of Shopping Centres, Jean-Michel Silberstein, stated that foot traffic throughout the nation fell by more than ten-percent. A severe drop in both traffic and revenues occurred during the aforementioned demonstration, which involved at least 3.7 million people.
As expected, small independent stores were badly hit and they are likely to absorb further damage since they lack the international operations of larger establishments. Still, even the aristocracy of French retailing centers located in the heart of Paris, which are typically resilient to economic downswings due to sales generated from foreign tourists, have felt the pain. World renowned department store, Galeries Lafayette, reported a decline in revenue following the terrorist attacks, a condition shared with its prime-luxury competitors.
Sadly, many French retailers were banking on strong winter sales to turn around their fortunes after suffering through a stalled economy and consumer austerity. High unemployment and a weaker Euro against the dollar have stifled purchasing power in the second-biggest economy within the European Union. The month of December did show a lift in consumer confidence as lower energy costs mitigated some of the damage due to an inflationary environment; however, that confidence now appears to have been snuffed out at an extremely critical juncture.
In financial news, the U.S. equities sector closed in the red for the fifth consecutive day, sparking worries about future market stability. The Dow Jones Industrial Average lost nearly 104-points on Thursday, while the benchmark S&P 500 finished the session down nearly a percent against the prior. The precious metals complex received a boost when it was announced that the Swiss National Bank axed its long-standing minimum exchange rate against the euro, moving gold up 2.4-percent against Wednesday’s session, while silver is now within striking distance of 17-dollars. Palladium was the only metal that fell into negative territory, closing down at 769 on the ask. In digital currency news, bitcoin sustained heavy losses earlier in the week until the Swiss bank announcement pushed prices just under the 200 dollar mark.
And that will do it for this edition. Thanks for watching and we’ll see you next week!